Spirit Airlines' cheap fares offset by numerous fees, strict policies

A Raymond James report found Spirit Airlines had among the lowest fares of U.S. airlines. On the flip side, Spirit passengers filed complaints last year at six times the average rate of top airlines.

Associated Press (2010)

A Raymond James report found Spirit Airlines had among the lowest fares of U.S. airlines. On the flip side, Spirit passengers filed complaints last year at six times the average rate of top airlines.

FORT LAUDERDALE — Spirit Airlines offers its customers low fares. It also brings some of them to their knees. Last Tuesday, it was Nathaniel Johnson. Four scales stood in the way of his approach to the Spirit ticket counter. Spirit lowered its limit to 40 pounds this year and charges a penalty of at least $25 for each overweight bag. Johnson's bag tipped the scale at 44. So, along with some other passengers, he dropped to the terminal floor and rummaged through his bag. He gave two pairs of shoes to a traveling companion and put a third in his carry-on. That got him to 39 pounds. "It's a little bit annoying," said Johnson, 25, a civil engineer from New York. That pretty much defines Spirit. Cheap but annoying.

When new CEO Ben Baldanza took over in 2006, Spirit operated like a full-service airline and gushed red ink. Backed by new owners, he embraced the model of Irish no-frills carrier Ryanair: rock bottom base fares and fees for every service imaginable.

The new Spirit turned a small profit in 2007.

It has been in the black every year since and is now an industry leader with an operating profit margin of 12 percent — or 12 cents profit for every $1 in revenue. Total revenue this year should exceed $1 billion.

Spirit is a small but growing player in the airline business. Last year, Spirit ranked 20th among U.S. airlines in passengers flown (6.75 million). At Tampa International Airport, Spirit accounts for just 1.7 percent of all passengers, with two daily flights to Fort Lauderdale and one to Detroit.

The business model driving Spirit's success starts with a very low base fare. That will get a passenger on the plane, but little else.

Spirit was the first U.S. airline to charge for a checked bag. It is the only airline that makes passengers pay for a carry-on. Passengers also pay to select a seat, buy a ticket online and, starting in November, $5 to get a boarding pass at the ticket counter.

Revenue from sources other than tickets accounted for 35 percent of Spirit's revenue.

"Our strategy empowers customers to save by choosing the extra services that are of value to them," Baldanza said.

"There's a tradeoff flying Spirit,'' he said. "You're going to fly for less than you would on another airline. But you're also going to get a little less. For some segment of the population, that's a good tradeoff. For some, maybe it's not.

"And those are the people who ought to be flying a legacy airline or Southwest or JetBlue. If you ran McDonald's, would you be worried if some people want to spend 40 bucks for an 8-ounce filet? That's not who we're serving. I'm a different restaurant."

• • •

A financial analysis from brokerage firm Raymond James calls Spirit "the Dollar Store of the airline business."

By focusing strictly on price, the report noted, Spirit avoids chasing "premium" passengers, like business travelers willing to pay higher fares. Many traditional airlines cater to those customers but end up, as the report notes, running up the costs — and therefore the fares — of everyone on the airplane.

Said Baldanza: "Our view of the world is, if you don't check bags, you shouldn't pay for the infrastructure for people who do check bags."

He ridiculed Southwest Airlines' TV commercials attacking baggage fees as being "fundamentally dishonest."

"The reality is Southwest has all the same expenses for carry-on bags any airline has. They have to pay for that with revenues. So, everyone on the airplane pays for that. The hidden fee on Southwest is you pay for two bags even if you don't take two bags."

Bag fees mean more than money to Spirit.

As the Raymond James report noted: The fees cut the time it takes to load passengers by six minutes, improving on-time performance.

• • •

When a St. Petersburg Times reporter searched Spirit's website for a Tampa-Fort Lauderdale flight, the round-trip fare was just 2 cents.

But then came the fees.

Total at checkout was $53.40. It included $21.40 for federal and airport taxes, a $17.98 "usage fee" for buying the ticket online and a surprise $14 fee for travel insurance. The choice to buy insurance is preselected on the page, requiring customers to opt out. After a tart e-mail to Spirit, the policy was canceled.

• • •

Spirit's approach gives passengers some of the lowest prices, even with fees included, in the industry. The Raymond James report said Spirit's average one-way fare is $125, compared with $142 for Southwest and $158 for JetBlue for flights of similar distances.

But, as Baldanza notes, there are tradeoffs.

"We're very strict about following rules," he said. "We won't refund any nonrefundable ticket. We'll charge you a change fee if you want to keep the value (of the ticket). Sorry if your relative is sick or passed away. We run a pretty good airline but … don't give waivers to anybody."

Spirit will refund a ticket under one condition: death of a passenger or traveling companion.

• • •

On June 6, Janis Karem of Toledo, Ohio, booked a Spirit flight for a nurses convention in Tampa. Her flight was to arrive Sept. 21, the same day the convention began.

In August, she went back to Spirit's website to pay her baggage fee in advance. Only then did she discover the airline had changed her reservation to Sept. 20.

The airline had not told her of the change, Karem wrote in a complaint to the U.S. Department of Transportation.

Karem had to take a day off from work, pay for an extra night in a hotel, plus meals. "I pointed out that I also had incurred expenses related to this change … but I was told nothing could be done," she wrote to the U.S. Department of Transportation.

The government requires that airlines give customers a full refund if they change a reservation date, but nothing more. All Karem got from Spirit was a "sorry."

• • •

Last year, the DOT received 492 passenger complaints about Spirit. That works out to a rate of 7.3 per 100,000 passenger boardings. That's six times the complaint rate for the 18 biggest U.S. airlines.

"I don't think it's significant," Baldanza said. "If you ran a restaurant and 100,000 people came and seven and a half people had a problem, would you change the food from Italian to Chinese?" He dismisses the complaint recording system as a waste of tax money that doesn't help consumers.

Travel blogger and columnist Chris Elliott said the federal numbers likely represent only 1 or 2 percent of legitimate complaints against an airline. Few consumers know where to file grievances or don't think it will do any good, he said.

• • •

College student Caitlin Calabrese of St. Petersburg said her recent Spirit flights between from Tampa to Fort Lauderdale this month were okay. Her $55 round-trip fare was a deal, even less than the $74 Amtrak charges.

Her one complaint: Her knees rubbed the seat in front of her and armrests squeezed from both sides.

"There's no personal space," said Calabrese, a sophomore at Wales & Johnson University in North Miami. "If this was a two-hour flight, I don't know if I could have made it."

Spirit squeezes the maximum number of seats the government allows into every aircraft. The A319 jet Calabrese flew had 145 seats. United puts 120 seats into its A319s, and US Airways flies the plane with 124 passenger seats.

• • •

Shannon Cook of Myrtle Beach, S.C., paid $39.95 last year to join Spirit's $9 Fare Club, a membership that promised exclusive bargain fares. She didn't think the deals were all that great and used it only once. This summer, a mysterious $59.95 charge appeared on her Discover card.

Discover told her the membership had ''auto-renewed'' at the new, higher rate. The credit card company couldn't get her money back. She finally reached a person from Spirit by phone. Cook was welcome to cancel the membership, said the representative, but the fee was nonrefundable.

"If I don't want a service, why can they charge me for it?" she asked.

• • •

Spirit is running out of options for new fees, Baldanza said. The airline charges only for services and stuff that are "travel optional," he said, so seat belts and toilets are not next on the list.

But raising bag fees during peak seasons such as Thanksgiving and Christmas is a possibility.

Ho, ho, ho.

Steve Huettel can be reached at huettel@sptimes.com or (813) 226-3384.

.by the numbers

Some Spirit fees

Carry-on bag*$30

First checked bag*$28

Second checked bag*$35

Passenger usage fee$8.99

Reservation
booking fee$10

Boarding pass
printed at airport$5

Change fee$115

*At booking/before check-in.
Each way.

Spirit Airlines' cheap fares offset by numerous fees, strict policies 10/15/11 [Last modified: Sunday, October 16, 2011 1:45pm]

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