Spirit Air's CEO Says Rivals' Super Cheap Seats Could BackfireBy
Customers may be surprised by lack of perks, Fornaro says
CEO: ‘A lot of their best customers can be the most upset’
A surge of no-frills seats at the biggest U.S. carriers potentially will backfire as passengers discover all the perks they’re giving up, said the chief executive officer of discounter Spirit Airlines Inc.
Prohibitions on changing a reservation or bringing a roll-on bag may disappoint some customers of the new fares at American Airlines Group Inc. and United Continental Holdings Inc., Spirit CEO Bob Fornaro said Wednesday. While Spirit charges for carry-ons and even soft drinks, at least customers know what they’re getting, he said.
American and United started selling so-called basic economy fares on certain routes this week, stepping up efforts to win back customers siphoned off by Spirit and Frontier Airlines Holdings Inc., another deep discounter. Giving up so many amenities in coach could anger loyal customers if they buy cheap fares without fully understanding what they’re getting.
“A lot of their best customers can be the most upset,” Fornaro said in an interview at Bloomberg’s headquarters in New York. “It’s not a brand new product, it’s a pricing scheme.”
American said it would provide clear information to customers to avoid such confusion.
“We’ll help our customers understand what they’re buying with multiple clear disclosures about how basic economy works from the moment they choose their fare through the day they fly,” said Josh Freed, a spokesman for the airline.
United didn’t immediately respond to requests for comment. Delta Air Lines Inc. debuted no-frills fares in 2012 and allows customers to bring roll-aboard bags on the plane.
Seating-capacity growth of 20 percent or more in recent years and Spirit’s expansion into hub markets dominated by American, Delta and United sparked pricing battles that dropped fares across the industry. The debut of basic economy fares is “the next step for them to compete” and is seen as less expensive than a blanket match of all of Spirit’s fares, Fornaro said.
“The message from the largest carriers is stay away from our hubs,” he said.
Fornaro, who joined Spirit as CEO a little more than a year ago, is speaking Thursday at The Wings Club in New York. Among other topics, he plans to take up an issue that may not endear him to his largest rivals: Open Skies air treaties, which lay out the rules for service between countries.
American, Delta and United have pushed the U.S. government to put caps on the growth of three Middle Eastern carriers, Emirates, Etihad Airways PJSC and Qatar Airways Ltd. The U.S. airlines accuse them of using heavy subsidies from their home governments to flood the U.S. with inexpensive flights, an allegation the Persian Gulf carriers deny.
Fornaro said he would be more vocal in joining with JetBlue Airways Corp. and FedEx Corp. in countering those calls. While the major airlines are concerned about additional foreign encroachment, he said, “we face competition on 90 percent of our routes.”