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Lo-res_3202205-SIf you fly Spirit Airlines, your fare will be pretty cheap. But your final cost is likely to be much higher, after you factor in fees to select a seat, purchase a cola during the flight, check a bag, or even carry your backpack on board. The overall price you pay even might surpass that associated with flying the major airlines, if you add in the inconvenience and frustration costs that can accrue due to Spirit’s poor on-time arrival performance and sparse customer service provision.

Spirit’s approach has been purposeful; its previous chief executive asserted that customers would get what they paid for, so cheap fares meant cheap service. In turn, the airline routinely earns the poorest scores in the industry when it comes to customer complaints and on-time arrival rates. But by skimping on service, the costs to the company to fly people to their destinations are about half of what conventional airlines wind up spending. Thus for a customer who is not in any hurry and is willing to go without the luxury of pleasant service, Spirit has been deeply appealing, as signaled by a recent 27 percent annual increase in the number of passengers booking with the low cost option.

Yet the complaints also suggest that the low cost approach might not be totally sustainable. Spirit still accounts for substantially less of the travel market than traditional airlines such as Delta and United. Furthermore, some savvy customers have figured out that on certain routes, the cost of a regular fare from a full-service airline is about the same as the total cost associated with buying a cheap fare but then having to pay for basic services such as carrying a bag onto the plane.

Therefore, under a new chief executive, Spirit is revising its service provision, at least somewhat. It will invest in improving operational capacities, in an effort to improve its on-time performance. In so doing, it might be able to save the costs that the airline frequently incurs, when it has to reimburse passengers for cancelled flights.

Furthermore, it will devote more effort to explaining its pricing and service model to customers, noting evidence that shows that most of the complaints it receives come from first-time customers who are surprised by the baggage fees when they arrive to check in for their flights. That is, these passengers did not know to expect to have to pay to carry on a bag, and the unpleasant surprise leads them to complain vigorously. By making the information more obvious on its own website, as well as sending messages explaining the policies to customers who book through third-party sites like Travelocity or Orbitz, Spirit hopes to eliminate such frustrating surprises.

Despite these moves though, Spirit remains committed to keeping its overall costs low so that it can continue to undercut the major airlines on fare prices.

Discussion Questions:

  1. Which gaps of the GAPS model is Spirit Airlines attempting to address?
  2. Is Spirit Airlines changing its pricing model with these new initiatives?

Source: Annalynn Kurtz, “Spirit Airlines Wants to Stay Cheap but Not So Tawdry,” The New York Times, June 27, 2016