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Increased Competition Forces Spirit Airlines to Rethink Bare Fare Strategy

Increased Competition Forces Spirit Airlines to Rethink Bare Fare Strategy

2017 03 03

2017 03 03

Jason Rabinowitz - forbes.com

Ask most people for their opinion of Florida-based Spirit Airlines and you will likely get a wide range of negative responses. For years, Spirit has been expanding its reach across the country, offering its “bare fare” of unbundled service options such as seat selection and carry on bag as optional extras. With a new CEO at the helm, Spirit is slowly pulling its reputation out of a nose dive while still applying pressure on the “big three” airlines.

Once dubbed the “Spirit battle fare,” Delta, United, and American have all introduced various forms of basic economy fares to, in part, better compete with Spirit and other ultra low cost carriers. With the majors aggressively price matching Spirit, it could no longer afford to run an operation resulting in off the chart levels of customer complaints and a dead last on time percentage.

“We paid lip service to the customer,” said Spirit CEO Robert Fornaro during a recent interview in New York City, now in his 14th month on the job. “For the most part, if we weren’t doing a good job, the customer paid the price, and we were unapologetic about it. Over time, you kind of get a reputation that you get what you pay for, so to speak.”

In the Department of Transportation’s February 2016 Air Travel Consumer Report, Spirit’s on time percentage ranked dead last among all major airlines, with just 68.7% of flights arriving on time. A year later, Spirit climbed to 72.1%, surpassing four of its competitors.

“We’re not at where we’re going to end up,” said Fornaro on improving Spirit's on time percentage. “We basically have launched what I would consider a continuous improvement program. My goal is ultimately to get the airline to run fairly stable… A lot of things have been designed to get the airline into a steady position so we can really see where the issues are, and then gradually build in improvement.”

Meanwhile, complaints to the DOT hit 10.97 per every 10,000 enplanements in 2016, dropping nearly 65% to 3.73 in 2017. Part of Spirit’s problem stems from a lack of consumer awareness of its “bare fare.” About two-thirds of Spirit’s bookings come directly from Spirit.com, with ample warnings about the nature of the fare appear. The remaining booking come from online travel agents where the stern warnings about what to expect on Spirit do not appear.

While Spirit embraces the third of its customers booking with online travel agents and fare comparison sites, it is taking steps to better communicate post booking. If an email address is passed through with the booking, Spirit is now proactively emailing customers, rather than presenting them with multiple expensive surprise fees once at the airport.

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