CEO Gaffe of the Week: Spirit Airlines
May 4th 2012 3:25PM
Updated May 4th 2012 3:26PM
This year I introduced a weekly series called "CEO Gaffe of the Week." Having come across more than a handful of questionable executive decisions last year when compiling my list of the worst CEOs of 2011, I thought it could be a learning experience for all of us if I pointed out apparent gaffes as they occur. Trusting your investments begins with trusting the leadership at the top -- and with leaders like these on your side, sometimes you don't need enemies!
This week I want to highlight the CEO of Spirit Airlines (NAS: SAVE) , Ben Baldanza.
The dunce cap
Days like yesterday make you wonder if airlines really do hate their customers.
Not more than a few weeks after I pointed out some of the most egregious charges in the airline industry did Spirit Airlines go above and beyond with its announcement that, as of Nov. 6, it would be charging $100 for both domestic and international carry-on baggage checked at the gate. No, your eyes aren't deceiving you; I really did say $100 for a carry-on bag!
In addition to this $55 price hike, Spirit noted that it would be increasing the price of carry-on baggage checked with its airport representatives and its kiosks from $40 to $50 as of Nov. 6.
Now here's the truly odd part: The company is actually lowering the price by $3 for checked bags on international flights if you make the purchase online, but raising the price by $2 for domestic flights if paid for online. In short, the pricing leaves consumers even more confused than they already were regarding Spirit's "optional fees" pricing.
These moves are nothing new for the airline sector. Allegiant Travel (NAS: ALGT) followed in Spirit's footsteps by instituting a $35 carry-on baggage fee just a few weeks ago, while others, like Delta Air Lines (NYS: DAL) , have enacted massive checked baggage fees to make up for ticket-pricing shortfalls. The question is: Will it ever be enough?
To the corner, Mr. Baldanza...
But wait -- there's more!
It would be easier to digest such huge price increases if Spirit Airlines were struggling, but the company just this week reported an industry first: more than $100 per passenger in service fees in its latest quarterly report. At what point can you no longer squeeze blood out of a turnip?
If you ask me, we've reached the point where "optional fees" no longer seem optional, especially if the cost of my carry-on luggage could exceed the ticket price of my flight. Mr. Baldanza can continue to tout that these service fees are nothing more than "optional fees," but I find it increasingly hard to believe that checking a bag at the gate is going to become $55 more expensive overnight as of Nov. 6.
Also worth noting is Spirit's choice for its new chief financial officer: Ted Christie, former CFO of the recently bankrupt Pinnacle Airlines and then-CFO of Frontier Airlines when it went bankrupt in 2008. Interesting choice, Spirit. I'm certain it'll work out well!
As an added bonus, if anyone wants to feel the frustrations of being stuck in an airport without having to go to one, visit Spirit Airlines' "optional fees" page. I guarantee you it is the most confusing fee structure you will ever encounter -- and, best of all, you can view it for free. It is, perhaps, the only opportunity to use the words "free" and "Spirit Airlines" in the same sentence.
Do you have a CEO you'd like to nominate for this dubious honor? Shoot me an email and a one- or two-sentence description of why your choice deserves next week's nomination, and you just may wind up seeing your nominee in the spotlight.
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At the time this article was published Fool contributor Sean Williams has no material interest in any companies mentioned in this article. He is merciless when it comes to poking fun at CEO antics. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy that never wears a dunce cap.
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