The Worst Airline Is Among the Most Profitable

The Worst Airline Is Among the Most Profitable
Photo (cc) by redlegsfan21

We recently wrote that Spirit Airlines is too cheap to pay for a free customer service phone line, and has added that to its already long list of fees.

It has about 70 fees, The New York Times says. And those fees are making the airline lots of money, because it just doesn’t care if fees upset you:

“Spirit does everything it can to make or save a buck,” said Henry Harteveldt, a travel analyst with Hudson Crossing. “To its credit, Spirit doesn’t promise passengers that they’ll be coddled. Its customer service standards are terrible, and the airline’s actions have shown it doesn’t care about being liked or respected.”

“We care about the thing that customers tell us they care the most about, and that’s offering the lowest possible fares,” Spirit CEO Ben Baldanza told the Times.

“If you can do it yourself, it’s free. If we have to do it, you’ll pay for it,” he added.

Customers also care about service and flights showing up on time — both things they have no control over. By those measures, Spirit is the worst. The U.S. Department of Transportation gets six to eight complaints per 100,000 passengers, the Times says. That might sound low until you learn the industry average is 1.4. Its on-time record is 68.8 percent, compared with an industry average of 80 percent, the Times says.

By creating so many fees, the airline managed to lower its average airfare by 20 percent between 2008 and last year, the Times says. But total revenue per passenger grew over the same span by 12 percent, to $126.50.

So even though customers are hit with fee after fee on an airline with no business class, no movies, no Wi-Fi, no reclining seats, less legroom, no free food and no free bags — not even carry-ons — investors love it, the Times says.

“Since the company’s initial public offering two years ago, shares have more than doubled,” the Times says. “They traded at $30.43 [on May 31], valuing Spirit at $2.21 billion.” It had some of the best returns in the industry last year, the paper added.

Oddly enough, Baldanza likens his airline to Southwest Airlines in the 1980s. A quick price check for Fort Lauderdale, Fla., to Los Angeles in early August, shows Spirit’s best base fare was $442.78, while Southwest’s was $468.10. Spirit wins that by $25, before you factor in the fees.

Southwest doesn’t charge for carry-ons or the first two checked bags, for instance. Those same bags on Spirit would cost $35, $30 and $40, making the Southwest flight about $80 cheaper.

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