Spirit Airlines No Frills Philosophy Paying Off

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With the currently struggling economy and high fuel prices there are few airlines that are still making substantial profits, Spirit Airlines is one of those few. They have been consistently profitable, having turned a profit in every quarter of the last four years. This is an impressive feat considering that the last four years have probably been the worst years, economically speaking, of the last few decades. Prior to this point four years ago they were not turning a profit so it begs the question “what changed”. The answer to that is, the company hired Ben Baldanza as its CEO and they have never looked back since. Prior to Baldanza’s hiring the company struggled to turn a profit as the airline is a small company in an industry that is known for chewing up and spitting out this size of a company. The problem with the previous business model was that Spirit Airlines was trying to offer ticket prices that were middle of the road and service that matched. This strategy has proven to be disastrous for many airlines and would have likely led to Spirit’s demise had they continued down this path.

In 2006 when Baldanza took over they evaluated every aspect of the airline’s operations and decided to implement many radical changes. The initial strategy was to compete as an ultra low cost airline that focused solely on making a profit. Every decision was driven by the impact it would have on the bottom line, putting customer service at the back of the line as a priority. They decided that every effort would be made to offer the lowest price fares of any airline, which meant charging fees for things that were included with a base ticket price on other airlines. This method allows customers to choose what services they want and not end up paying for things that they don’t care about. For example, they charge customers for a bottle of water, which is included for free with most other airlines. This may not seem like a big deal but when you multiply the cost of a single bottle of water by the total number of passengers an airline carries in a year you will see that it adds up quickly.

Another move which helped Spirit Airlines achieve profitability is to always configure aircraft with the maximum amount of seating as possible. While other airlines will often have aircraft configured with less seats to give passengers a few extra inches of legroom, Spirit Airlines puts the most seats possible in every aircraft which allows them to charge lower fares. For example, if operating costs increase by $1,000 per flight and this is spread amongst more passengers it will obviously result in much less of an increase per passenger under this model. There are many people who feel nickel and dimed by all of the fees charged by airlines, but in the case of Spirit Airlines these fees are all optional. When you are charged a mandatory fuel surcharge fee it feels like you are being taken advantage of but when you have to pay for a bottle of water that you ask for it doesn’t seem as bad. The reason for this is because people view optional fees in a much more positive light when compared to mandatory fees.

The last four years of profitability at Spirit Airlines has proven that there is a market for ultra low cost carriers. This is because there are many people who don’t care about the little extras when flying and just want the cheapest fare possible. Spirit offers customers the ability for its customers to receive extra services, you just have to pay a fee. In an economy where funds are so scarce it is no wonder that they have done so well using this model. The only question now is whether this model will work when the economy improves, if it ever does. The way things look right now, we may never know.