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Spirit Airlines is known for low fares. It even writes “Home of the Bare Fare” on its bright-yellow airplanes (although that’s now being removed).
It was also known for thorny labor relations, a poor reputation with flyers — and very high profits.
About half of those profits come from ancillary fees, for items such as seat assignment, carry-on luggage and food. Spirit makes more money per passenger per flight on those fees than any other airline in the US, with an average of $56.70.
Now, the Fort Lauderdale-based airline has a new chief executive, Ted Christie, who took over in January amid some upbeat numbers for Spirit’s much-maligned service. In the year before he became the boss, Spirit rose from the back of the pack to near the top in operational reliability, scoring number one for on-time departures in December 2018. It had the least lost baggage of any US carrier last year as well, and it matched the industry leader, Delta, for the lowest number of cancelled flights in 2018.
When we sat down with him at Spirit’s Florida headquarters earlier this month, Christie told us about a few changes that will affect the passenger experience on Spirit positively.
First and foremost is the introduction of Wi-Fi, although that is behind schedule and won’t be fleet-wide until 2020. The airline is also going to introduce slimmer seats that will change the look of its cabins, although legroom will still be tight. And while it’s getting more Airbus A320neo jets with the range to fly coast-to-coast and to Hawaii, it says that it won’t join Southwest in the race to the islands.
Christie’s answers have been edited for clarity and brevity.
TPG: Last year Spirit announced that it would become the first ultra-low-cost airline in the US to offer inflight Wi-Fi connectivity. The product was supposed to be rolled out fleetwide within a year of the announcement. Nearly a year later, it isn’t yet available.
Christie: We were hoping to be done by this year. That probably won ‘t be true. It will stretch into next year to get the fleet completely retrofitted. There’s been some supply-chain logistical issues from the manufacturer of the equipment, Thales. Let’s say there’s a dozen or more airplanes today that have the mod completed, except for the antenna.
The quality of the product when it’s on board is going to be best in class. It’ll be streamed to seat. It affords us an opportunity to use that communication platform in ways that we just don’t have today. We can talk to our guests on board and say, “Hey, you know, there’s plenty of other things you get to do if you’re a regular Spirit guest.”
What about prices?
It’s got a revenue upside to us because we will receive a commission as part of the sale [of the Wi-Fi service].
The pricing is a partnership discussion [with Thales] because that’s the merchandising component — how you price it and how you sell it. So they did actually look to us. They said we are uniquely good at that because of the way we’ve built an ancillary model and the way we’ve developed our pricing around that. It’s intended to offer the best value to each and every person buying whatever that thing is.
Are you going to refresh the cabin?
First and foremost, it’s probably going to be more consistent with the brand so you’ll see more black and yellow than you do today.
We are looking at the next generation of slimline seat or another version of a seat type that we deploy today that’s going to be a bit more comfortable. There will be a more traditional full-size tray table.
We have an opportunity to do that when we start receiving the company’s first formal delivery of Spirit-owned (Airbus A320neos) aircraft this fall.
Spirit had made strides in being customer-friendly, but complaints to the DOT per 100,000 passengers are still three times higher than other domestic airlines.
While we’re still higher than the industry average in complaints, we’re down some 70 percent year over year so we’re making the right progress.
The Spirit of old was taking advantage of the fact that it was new and splashy and trying to find its way and it took advantage of opportunities to market that in cost-effective ways. And that was because that was needed at the time. The dress-up or the improvement to the brand image that you’re seeing from us is very much coinciding with the improvement in the quality of the airline.
Spirit is considering buying a regional-jet-sized plane like the Airbus A220 or Embraer E Jets that could open up new markets. What are you looking at?
We invited all four aircraft types: additional A320neos, Boeing 737 MAX, Embraer E2, and Airbus A220 to the process and received responses back on each. We are in the middle innings right now. I would say we’ll make a decision by midyear.
[This conversation took place before the recent grounding of the 737 MAX.]
On the last earnings call, you said the current loyalty program and credit-card relationships were “a bit dated”. Can you elaborate on why, and on how you intend to overhaul the program?
Stale would be the word I would use. So, tactically we made a few changes to the way we’re merchandising the credit card on board the airplane, which is our single best vehicle for acquisition of new credit card holders.
We’ve decided the overall loyalty view at Spirit needs to have a fresh approach. We have three components: The paid loyalty $9 Fare Club program, mileage accumulation, and an affinity card. We like all of them, but none of them really interact today.
So there’s going to be a lot of thinking, marketing, surveying and testing — setting us up for a kind of cohesive view around loyalty. There will be probably be an eventual change when our credit card program is up for renegotiation.
Do you see Spirit entering the uber-competitive nonstop transcon market?
We don’t do much of that today. We do a little out of Fort Lauderdale to LA and Seattle seasonally, and if you consider Las Vegas transcon, we do that too.
But if anything, towards the tail end of last year we got rid of a lot of long-haul flying and we started to redistribute into our core, like adding much more service in Orlando while continuing to build up Fort Lauderdale, Tampa, New Orleans, and Fort Myers seasonally. Maybe our product is best served at a certain length of haul. It’s probably got a niche to it. That doesn’t mean we don’t want to explore it tactically. But I don’t see it being a big component of who we are.
Given your strength in leisure markets like Florida and Las Vegas, what about cross-border flying to Canada?
South Florida is a big Canadian market actually. We get you most of the way there. We have Plattsburgh and Niagara Falls which are effectively Canadian markets. But the currency issue is [tough]. We’re predominantly a US-dollar carrier today and when you fly into Canada, you need to distribute and sell in Canadian dollars.
And then there are other regulatory issues around language translation. You have to operate in both French and English and that’s not something we do today. Further, the costs of the Canadian airports are among the highest in the world, at least the primary airports. Still, there’s a market affinity with Canadians, so you never say never about that.
And what about Hawaii?
I think Hawaii would be a real long shot for us to be honest. I just happen to know that operationally it’s a challenge for us at our density with the range in and of itself. But right now there’s obviously no desire to do anything there.
Featured image by Chris Sloan.
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