Why Spirit Airlines Will Never Be Great Again

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Spirit Airlines
Sometimes you get what you pay for when you book a cheap flight.

Passengers on Spirit Airlines (SAVE) Flight 310 over the weekend had to wait nearly 20 hours to fly from Los Angeles to Florida, after an unruly passenger forced the crew to make an emergency stop in Texas.

A vision-impaired 86-year-old man, flying alone, began kicking and ranting in what appears to have been a moment of confusion. The pilot landed in Houston, an airport not served by Spirit. After customers were stranded for two hours on the tarmac and another 10 hours in the terminal, a new plane and crew were brought in to fly the passengers to their destination. (The original crew was already over the federally mandated maximum number of hours that they could be allowed to work.)

Why didn't the original crew either land in Dallas -- an airport serviced by Spirit -- or simply fly out to Dallas after the problematic passenger was detained?

When you specialize in fares as low as $9 and your ticker symbol just happens to be SAVE, cutting corners to save costs is just part of the game.

There's No Free Lunch

The secret to Spirit's low rates is a laundry list of fees that make even legacy carriers seem charitable. Passengers have to pay as much as $45 for a carry-on bag.

You read that right. Even the carry-on bags that most airlines allow for free sometimes may cost more than the actual fare. There are also fees for reservation bookings, assigned seats, and even soft drinks -- extra charges that you don't see at the airlines Southwest (LUV) loves to make mock for their ridiculous fees.

The result is that passenger reviews are generally negative for Spirit. Read any online account of the Flight 310 incident that allows for reader comments and the venom kicks in fast.

Spirits and Ghosts

You wouldn't know that anything is amiss at Spirit if all you were doing was kicking the tires of its financials.

Operating revenue climbed nearly 30% higher in this year's first quarter, fueled by flight expansion and higher fares. The company makes no bones about letting investors know that its strategy is to "stimulate traffic by offering low base fares while increasing revenue from non-ticket sources."

You see it in the metrics. The average ticket revenue per passenger flight segment actually fell 7% to $76.65 over the past year, while the non-ticket revenue soared 21% to $51.68.

Investors may love to see that, but passengers will see things differently over time if more unruly Spirit passenger stories emerge.


Fasten Your Seat Belts, Investors

Spirit has a rock-solid balance sheet. The company closed out its March quarter with no debt and $421 million in unrestricted cash.

Older airlines -- weighed down with debt, costly employee contracts and pensions -- won't necessarily be able to compete with Spirit as it "liberates" new markets in its expansion path. It's ironic that just days before the Flight 310 fiasco, the company announced that it would start servicing Houston's George Bush Intercontinental Airport.

Flights there won't start for another two months, so perhaps the Flight 310 mishap was just a test landing.

Spirit went public at $12 last year, and it's one of the few IPOs from last year to be trading sharply higher today. Every quarter in its brief public tenure has generated better-than-expected profitability, and that will likely be the case when it reports again in two weeks.

However, investors know that evaluating companies isn't just about healthy balance sheets and growing income statements. The model has to stand the test of time, and that's where Spirit -- and all of the ill will that will tarnish the brand in the coming months and years when it comes to its non-ticketing fees -- comes up short.

You can be cheap and still provide a great product. Southwest has been doing it for decades. JetBlue (JBLU) provides complimentary perks that passengers often associate with pricier carriers.

Sorry, Spirit. You just don't make the grade.

Longtime Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. Motley Fool newsletter services have recommended buying shares of Southwest.


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47 Comments

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Sergey Gusarov

Spirit is the worst! Their continued existence is a mockery of decent business practices and corporate social responsibility. It's time we do something about it!

5 Reasons NOT to fly SpiritAirlines
http://visual.ly/5-reasons-not-fly-spirit-airlines

For more check http://www.FSpiritAir.com/

October 17 2013 at 2:18 PM Report abuse rate up rate down Reply
CHARLES

The hidden name for that airline is Evil. The name is Evil Spirit.
S.P.i.R.I.T , means,. Sky Pirates Intentionally Robbing Innocent Travelers. So the Name ought to be Evil Sky Pirates Intentionally Robbing Innocent Travelers

January 05 2013 at 10:35 PM Report abuse rate up rate down Reply
Alan

Whe I first flew Spirit a few months ago, I thought the model was nuts. Not anymore. One you understand and expect the al a carte charges, you can plan ahead and work with it. If you join t e $9 club, you will not have any greater fees for luggage than you would for any other airline. I have flown for at least 1/2 the price of American and United even for last minute flights. American and United will punish you royally if you try to make a reservation even a week ahead not to mention a day or two ahead. I have had to fly recently on a New York to Chicago route and made a reservation one day ahead. American and United ONE WAY was around $375.
Spirit, though not cheap was $183 including taxes. I brought my own sandwich on board, bought bottled water at the terminal and my own tea bag (Sprit gave me hot water for free to dunk my tea bag!) I had a very stuffed personal backpack (no charge), wore my suit on the plane and i was fine. Their planes are all very new flying Airbus 319, 320 and 321. I have confidence with an airline with newer planes. Amercian, especially has not invested or lease new planes. I worry that many are very old and could eventually have issues. American and United can also have many delays. For the most part my Spirit flight have not only been on time (other than weather issues), but left earlier and arrived earlier. The financial balance sheet of Spirit is better than almost any other airline. Do you trust that another airline in bankruptcy or financial difficulty won't skimp on things that are important? If you indertand and accept thier model and prepare for it accordingly, you will not be diappointed.

July 16 2012 at 10:24 AM Report abuse rate up rate down Reply
broomejl

Prefer to walk, Will not be flying spirit again in the future. Last 2 trys ended in Disaster,Flight arrived with tired pilots and all suffered 5 hour delay, missed flights , etc while pilots rested . No thoughts for the 100 plus passengers who sat around the Airport , missed their flights , with no alternative except refund or wait till tomorrow for next flight. No to mention all the BS charges.
CHEAP NO GOOD, GOOD NO CHEAP really applies when thinking of booking on Spirit !!!!! Pay a little more and enjoy !!!

July 14 2012 at 3:54 PM Report abuse rate up rate down Reply
1 reply to broomejl's comment
CHARLES

den name for that airline is Evil. The name is Evil Spirit.
S.P.i.R.I.T , means,. Sky Pirates Intentionally Robbing Innocent Travelers. So the Name ought to be Evil Sky Pirates Intentionally Robbing Innocent Travelers. well we also know about Good and Cheap.
There is nothing in this world that is good and cheap, because if its good it will not be Cheap and if its cheap it can not be good.

January 05 2013 at 10:46 PM Report abuse rate up rate down Reply
jms6724

I'm sorry all of you had problems with Spirit. My wife and I have not!! We love the deals. We get more than we pay for. If you get a $9 dollar flight and have to pay for baggage and a nicer seat but get it for over 1/2 of the major airlines price.... duh????? Ever have a problem with a connection or cancellation with Delta or AA or US Air? I think so... So quit complaining and just pay for what you want.. If Delta charged for seats and baggage and carry-ons maybe their base fare would be cheaper too. So get off your band wagons and fly as cheap or expensive as you want......

July 14 2012 at 11:02 AM Report abuse rate up rate down Reply
n5monthsocrapleft

spirit sucks, charges you for walking in there terminal ,boarding fees, for each bag ,for any water on plane,for use of pillows blankets n customer service is just out right plan rotten ,id rather walk across the country . !

July 14 2012 at 4:55 AM Report abuse +1 rate up rate down Reply
rstev54629

To the people who had trouble using miles from their Spirit credit card: My wife and I were able to get two round-trip fares so far, paying only taxes and applicable fees, with no problem at all. I think the difficulty arises from not looking at the award levels by region (where you are flying from) and date (when you are flying.) Also, there is an ascending fee scale if you are booking less than 180 days in advance. As others have said here, you have to READ the details.

Also, we have taken advantage of the $9 club many times and have flown from ACY to Orlando for incredibly low fares.

Bad customer service? Not so different from other carriers, but even if it is, its just a matter of putting a price tag on it. As I said in the first post of this thread, Delta, United, etc may sometimes be the best choice, and sometimes it's Spirit or others like it. As we used to say, "That's Why Baskin-Robbins makes 31 Flavors."

July 13 2012 at 9:24 AM Report abuse rate up rate down Reply
doonooch

very short sighted business model. It's destined to fail when they nickel and dime their customers for the most basic things, such as carry on bags, or use of the lavatory. can't wait for them to compeletly disappear.

July 13 2012 at 8:13 AM Report abuse +2 rate up rate down Reply
mccglf

All the airlines are doing bait and switch. Spirit is only the worst.

July 12 2012 at 11:12 PM Report abuse +3 rate up rate down Reply
marilynbibbee

Spirit Airlilnes are nothing but crooks. We switched to a Spirit credit card for miles and we had over 75,000 miles earned on the card and we were never able to book anything with the miles because every time we went on line to use them, the flights were always filled up or blocked out regardless of what dates we asked for or how far in advance we planned. They just played us like suckers and never intended to honor their obligation to give us two free tickets to Virgin Islands. total rip off and we canceled the card and gave up. But after all the scandals and bad complaints against them, we would not even fly free with them if they offered it now. They can take a flying leap for all I care.

July 12 2012 at 9:41 PM Report abuse +1 rate up rate down Reply