Spirit Airlines Passengers Go for Cheap Tickets Over Time
Spirit Airlines Inc. (SAVE) carved out a niche as the ultra low-cost, no-frills carrier, charging for everything from carry-on bags to printing boarding passes. It’s achieved another get-what-you-pay-for milestone, this time as the airline with the worst on-time record in North America.
While a ticket from Boston to Fort Lauderdale, Florida, on Spirit goes for as little as $112, and a trip from New York to Chicago can be had for $54, there’s only a 67 percent chance the flights will land when they’re supposed to, according to rankings data provided by FlightStats Inc. and compiled by Bloomberg. That put Spirit dead last in 2013 among 35 carriers in the U.S., Canada and Mexico.
Chief Executive Officer Ben Baldanza is betting that cheap tickets will trump everything else. With passenger traffic up 24 percent last year at the Miramar, Florida-based airline, and its stock more than doubling in 12 months, fliers and investors are signaling he may be right.
“Spirit’s on-time track record may not be very good, but customers keep showing up,” said Hunter Keay, an analyst with Wolfe Research Inc. in New York. “And that’s all that really matters because people vote with their wallets.”
With a fleet of 54 single-aisle jets from Airbus Group NV serving destinations in the U.S., Mexico, the Caribbean and Latin America, Spirit is small with plans to grow. That may not necessarily affect punctuality, according to Deanne Gabel, a spokeswoman for the airline.
“We typically run below the industry average because our network is so broad and thin,” Gabel said. “So we will make the conscious decision to take a delay versus a cancellation.”
Because Spirit has a limited number of departures each day from any airport, and in some instances only a few a week, it can’t just call off a flight in the case of bad weather or a sick pilot and rebook passengers on the next jet out.
So 32-year-old Spirit does well in one category, as the carrier with the third-fewest cancellations, according to Portland, Oregon-based FlightStats, after Allegiant Travel Co.’s Allegiant Air and Virgin America Inc.
FlightStats issues monthly reports on performance, based on data it collects from the Federal Aviation Administration, airline reservation systems, the carriers themselves and the 40 busiest airports in North America. Hawaiian Airlines Inc. and Alaska Air Group Inc.’s Alaska Airlines rank first and second in punctuality, according to FlightStats.
The U.S. Transportation Department’s Office of the Inspector General reported in December that government accounts of industry on-time performance are lacking, because federal agencies don’t track international flights or those operated by small carriers like Spirit that are responsible for less than 1 percent of total domestic passenger revenue.
Even passengers who like Spirit’s discounts may bristle at the add-on costs.
“They have carved out a niche that is very different than everybody else,” said Bob McAdoo, an Imperial Capital LLC analyst in Los Angeles, who, like Wolfe’s Keay, has an outperform rating on the stock. “It’s so new and so different that a lot of people who don’t understand it hate it.”
What can stoke the most ill will are the fees for services and items other airlines wrap into the price of a ticket. Spirit lists them all on its website, where it says it “empowers customers” by giving them “the freedom to choose only the extras they value.”
Want to bring a carry-on that’s bigger than a purse? That will be $26 if you pay when you book or $50 at the airport desk. If you’d prefer to choose where you sit (and wherever that is, the seat won’t recline) it will cost as much as $50. For what are called “big front seats,” more legroom and no middle spot, you will be charged as much as $150.
Lisa Monica Vargas, who flew Spirit for the first time during Super Bowl weekend Feb. 1-2, said she was wary after reading reviews. The airline comes in for some harsh critiques from fee-haters on sites like TripAdvisor (TRIP) and Skytrax.
“I was expecting the worst, but we were very pleased because we read the fine print,” she said. “We did our homework.”
Vargas said she and her husband together paid $200 to fly from Los Angeles to Las Vegas and back, and that she spent $30 to check her luggage on the way out. Her sister drove her suitcase back to California for free.
While major airlines covet businesses-travelers who are more likely to buy a business or first-class seat, Spirit courts leisure-travelers and those who might not otherwise be able to afford to fly.
“Most people on Spirit’s flights don’t have to worry about being late for a business meeting,” Keay said. “They’re going to be frustrated and they’re going to be inconvenienced, but starting a vacation a few hours late is not the same as missing a meeting all together.”
There are no plans to change Spirit’s successful business model, said Gabel, the spokeswoman. The company’s shares have more than doubled in the past year, closing yesterday at $46.33, to lead the nine-carrier Bloomberg U.S. Airlines Index. The company first sold shares in 2011 with a $187 million initial public offering.
“Customers indicate that their number one decision is price,” Gabel said, “and we absolutely deliver on that.”
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