Spirit airlines flight 380

■■■ Case 15 Company Case Spirit Airlines: The Lowest Possible Price—At All Costs Customers were tweeting terrible comments about Spirit Airlines. They were complaining about the lack of empathy they received from airline agents when their flight was cancelled. They are complaining about having to pay for extra charges after they had purchased their ticket. One customer tweeted out that one warning others not to fly Spirit Airlines. These comments, tweeted by real Spirit Airlines customers, are not the types of feedback a company generally wants to hear from customers. And at the same time that the airline’s operating philosophy has generated lots of negative testimonials in social media, it has also earned Spirit Airlines the dubious distinction as Consumer Reports’ lowest-rated airline for the customer experience. In fact, Spirit Airlines received one of the lowest-ever overall scores given by the esteemed consumer watchdog. Z03_KOTL6156_07_SE_CASE.indd 628 07/26/16 3:58 PM Case Studies 629 With that kind of reputation, you would think that Spirit Airlines is headed down a path to bankruptcy. To the contrary, however, Spirit is one of the fastest-growing U.S. carriers. It fills almost every available seat on every flight. And it turns profits each and every quarter—a difficult feat in the airline industry. In a world filled with companies doing back flips to fill each customer’s every desire that kind of financial success seems like an unlikely outcome given such a high level of customer dissatisfaction. How does Spirit do it? And what are customers complaining about? As it turns out, although Spirit Airlines doesn’t want its customers to leave its planes unhappy, its philosophy is described perfectly by an old adage—when you make an omelet, you have to break some eggs. Value Equals Low Price Spirit Airlines first began scheduled flights in 1990 out of Atlantic City. Over the next 17 years, the airline expanded along the East Coast with limited service to Caribbean and South American destinations. But in 2007, it unveiled an entirely new business model as part of a nationwide expansion plan. Billing itself as an “ultra low-cost carrier,” Spirit set its prices lower than any other airline on the routes it flew. In the years since, Spirit has consistently maintained lower prices— in some case up to 90 percent lower than competing airlines. But to fly so cheap, customers must not only pay the fare, they have to pay the price. When customers buy a ticket on a Spirit flight, they are paying for one thing and one thing only, occupying a seat on a plane from one destination to another. That’s because Spirit Airlines has deconstructed airline flight service, charging a fee for each and every service component. Charging fees for various components of flight service is common airline practice these days, but Spirit charges extra for everything. On Spirit Airlines, you really do get what you pay for—and not one peanut more. For example, although other airlines charge for food, they typically provide free beverages and a basic snack. On Spirit Airlines, a bottle of water or can of soda costs you $3.00. Want a pillow or a blanket? No problem. You can have both for the duration of the flight—for $7.00. Spirit offers no onboard entertainment or Wi-Fi. And seats on a Spirit flight are not only closer together than on other carriers, they don’t recline. Spirit packs about 30 more seats in the same space as standard airlines. If customers don’t want to be so close to neighbors in front of them—you guessed it—for a fee, they can get a seat in the exit row or the front row, providing some 10 extra inches of legroom. Spirit refers to its pricing practices as “frill control,” and it maintains that such pricing gives customers more control than they get with competing airlines. “We think of it as options that customers choose,” says Spirit CEO Ben Baldanza, who cringes at the word fee. In support of his “options” theory, he points out that the “free” soda on other airlines isn’t really free. Customers pay for it in the price of the ticket, whether they want the beverage or not. Although this approach sounds refreshing, many customers hold a different view, as suggested by the following customer experience: Jack had never heard of Spirit Airlines. But as he shopped for a flight from New York City to Chicago to attend a college reunion, he booked a roundtrip flight with Spirit, whose price was $60 cheaper than any other option. Upon checking in at New York’s LaGuardia Airport and requesting a seat assignment, the desk agent told him that would cost $15, unless he wanted to pay $25 to $50 for a seat with extra legroom. Jack opted for the $25 option, and was then charged $10 to print his boarding pass. At the gate, the agent told him there would be a fee for his standard carry-on bag—a whopping $100. The soda and snack Jack requested onboard cost him $8. On the return trip, Jack thought he had the system figured out. By checking in online, the fee for his carry-on bag was only $45 and the boarding pass was free. After checking in at a self-serve kiosk and making his way through security, he approached his gate with 15 minutes to spare. Thinking he had plenty of time, Z03_KOTL6156_07_SE_CASE.indd 629 07/26/16 3:58 PM 630 Case Studies he ducked into a gift shop to pick up a snack and a magazine for the flight. As he handed his boarding pass to the agent at the gate, Jack was told that, because he hadn’t arrived at the gate 15 minutes before scheduled departure, his seat on the sold-out flight had been given to a standby passenger. So he paid $150 to stay in an airport hotel, only to wake up at 3:30 a.m. to catch the only morning flight back to LaGuardia. So although he may have saved $60 on his ticket price, in the end his Spirit flight had cost him an additional $328—by itself almost as much as the round-trip fare. Jack’s example may represent a worst-case scenario. But the social media are filled with similar stories by unwary travelers.