Most-hated US airline is also the most profitable

Is an airline a utility or a service? The ones who act like a utility have more financial success.

By MSN Money Partner Apr 11, 2014 2:59PM
File photo of at Spirit Airlines Airbus A319 aircraft arriving at Denver International Airport on May 3, 2012 (© Andy Cross/The Denver Post via Getty Images)By Justin Bachman, Businessweek

Spirit Airlines (SAVE) inspires a special kind of wrath among the American traveling public: It's the industry leader in customer complaints by a wide margin. 

Over the last five years, Spirit's rate of complaints to the Department of Transportation was three times higher than other U.S. airlines, according to a report (PDF) released Thursday by the U.S. Public Interest Research Group Education Fund.

This is not the first time Spirit has been dinged for customer dissatisfaction. Last year it was the lowest-scoring carrier in a Consumer Reports survey of 16,000 readers. "Poor service, poor communication, poor quality," a commenter at airline-rating firm Skytrax wrote this week. "You couldn’t even make up how bad they are." The loathing has also inspired a dedicated Twitter (TWTR) feed: @hatespiritair.

Its customers will probably find this annoying, too: In spite of the rancor it inspires, Spirit has become the most profitable U.S. airline in terms of its operating margin and return on invested capital. Spirit's 16.2 percent margin is highest among U.S. public airlines, as is its 26 percent return on capital, according to data compiled by Bloomberg. 

Allegiant Travel (ALGT), the nation’s other ultralow-cost airline, has the second-best operating margin -- 12.7 percent -- followed by Alaska Airlines (ALK) and Delta Air Lines (DAL). Spirit shares have gained 439 percent since its mid-2011 public offering at $12.

"Customer complaints generally have a loose but inverse negative correlation to return on invested capital," Wolfe Research analyst Hunter Keay says, noting that well-liked JetBlue Airways (JBLU), Virgin America, and Southwest Airlines (LUV) lag financially. "The commitment to make the customer happy costs money." 

Keay says the low-cost model rightly treats airfare as a utility. "There really does not need to be a service component attached to consuming airfare."

To that end, Spirit, along with other ultralow-cost carriers, has done all it can to drive ticket prices as close to zero as possible. The point is to attract new customers with low fares, then squeeze them into a spartan, cramped cabin and charge them for any and all amenities: water, carry-on bags, seat assignments, and the like. 

Spirit's planes pack far more seats in the cabin than do other airlines, 178 on an Airbus A320 -- that's 28 more than on the same plane at United Airlines (UAL) or JetBlue. And Spirit's seats don't recline.

On the flip side of this financial success, Spirit is still growing rapidly. It plans to almost triple its 54-jet fleet by 2021. A cheap fare may be able to lure first-time customers, but it cannot necessarily keep them. Over time, if travelers increasingly dislike the experience, it's possible that Spirit's financial performance could stall. 

On the other hand, airfares are rising across the board (consolidation will do that), and plenty of people may decide that saving $100 or more is worth a little temporary indignity.

"Many of the DOT complaints about Spirit are driven by our customers not fully understanding that we offer unbundled fares that let them control how much they spend," spokeswoman DeAnne Gabel wrote in an email on Thursday. The airline has declared 2014 its "Year of the Customer." 

The goal, she says, is "to reduce complaints by helping customers learn about how to fly Spirit to go where they want and keep more money in their pocket." Spirit isn't an airline for everyone, but so far it hasn't had to be.

More from Businessweek

Apr 11, 2014 8:37PM
the walmart of flying.

only fools would demand rock bottom pricing and complain about lousy service.  

 complain with your them immediately and hire a new flying partner.
Apr 11, 2014 7:25PM
Let's see --- everyone hates them --- but --- SOMEONE MUST BE FLYING ON THEM.

Oh the schizophrenia !!
Apr 11, 2014 8:19PM
Flying sucks anyway. Too crowded. Some rude people who have the brain the size of a pencil tip. First class costs 5 times as much as coach...and for what??
Apr 11, 2014 8:11PM
I love this airline.  It's given me the chance to go on lots of short trips that I never could have otherwise afforded.  I flew RT from Vegas to Dallas for $39 once, to Baltimore for $125, Denver for $55....and I take COMPLETE joy in watching all the dumb rubes complain about all fees that the airline itself warns you about OVER and OVER!  These are sore losers like ANCORD....the same people who buy a Rolex from a NY street vendor for $30 and then when it stops working a day later, yell, "HEY, I've been SWINDLED!"  Every improperly packed bag that doesn't fit under the seat means a cheaper ticket for me.  Keep those 'THUMBS DOWNS' coming.  I'm laughing it up! 
Apr 11, 2014 9:09PM
Just got back from a trip to Ecuador on an airline called LAN. $650 round trip. 7hr flights. Nice plane w/ my own personal movies, pillow, blankie, & reclining seat. Super friendly and courteous. 2 meals each flight with free coffee, soda, beer, wine, even booze! 2 free bags checked. And this was economy class! Too damn bad they  only fly to/from South America.
Apr 11, 2014 9:29PM
The reason they are the most hated and the most profitable is very simple...they don't care about people, they are only concerned with their bottom line.  It's the same sickness that has ruined America. Greed!
Apr 12, 2014 1:05AM
A story such as this should give people an idea of how people in this country have the nastiest habit of saying one thing and then doing something else COMPLETELY opposite to what they speak.
If you've ever read a story about Spirit Airlines that has comments underneath it (like, THIS one), there isn't a single airline based in the United States that CONSISTENTLY receive worse reviews for its skinflint, cheapskate and low class operation than Spirit, yet, as this story shows, Spirit is STILL the most profitable airline of them all.
So, WHO is flying this airline? (And, I'll give you a hint: It's not me).
But, this is similar to a recent story I read where Walmart is absolute dead LAST in customer satisfaction, yet, #1 in retail store profits in this country.
And, the second place store isn't even CLOSE or in the same ballpark as Walmart.
Again, saying one thing and doing another.
Also, how politicians in Congress have been receiving single digit numbers for a number of years now, as far as the public's satisfaction with how they do their job, YET and once again, you wouldn't know it from how people vote(in the end, the ONLY thing that matters) as these same politicians CONSISTENTLY get re-elected.
The American way of talking out of both sides of their mouths.

Apr 11, 2014 8:23PM

I flew Spirit accidently this year via another carrier due to a connection not realizing it wasn't my main carrier.

I will NEVER fly them again or give them one penny!

I will go out of my way  NOT to fly them.

They were RUDE, NO CUSTOMER SERVICE, charged me for my bag again!

I was so upset by the lack of service and rude treatment; I wrote a letter to my main carrier airline asking them to not renew the contract that they had given them for this connection flight.


Fool me once but not TWICE!

Apr 11, 2014 6:42PM

After bad experiences, the bad words spreading like fire. Then customers start to stay away from bad airlines.

The good news is sometime we do not have a choice but to use the most hated airline, simply these crooks are the only one.

No matter what happens Southwest, JetBlue and Virgin are our first choice. Then if we have to, stuck with American Airline or United Airline.

There will be more consolidation ahead. Only the best survive and grow.

Apr 11, 2014 8:41PM
We have flown since 1963, a pretty long time. Have been on many airlines. Since 1998 we have used Southwest all but once domestically. The once was with US Air, using points that had to be used. That trip cost $50.00 roundtrip for my luggage. All we expect for a 1-2-3-4 even 5 hour trip is a soda and that is it. We bring our own snacks. We are usually on time within 30 minutes. Even flying cross country with a stop is 7 hours and about $275.00. The flying part is transportation, the rest is business or pleasure. Simply put, flying today, if time is important, is the only way to travel. 
Apr 11, 2014 8:57PM
Save  $2 on the ticket and spend $5 on antacid. If everyone with a complaint flew with another airline, they would at least change their name. THE CHOICE IS YOURS.
Apr 11, 2014 8:33PM
You get what you pay for, which is why I use the major airlines.
Apr 11, 2014 10:23PM
The problem is the other airlines have doubled their prices in the last 4 yrs, so Spirit is catering to the person who couldn't afford to fly without Spirit. It might be cramped and awful, but it's only a few hours of pain and then a week of paradise with relatives or a vacation, so they are selling every ticket.  I see this catching on and with the crappy economy will be the only way the middle class can fly anymore. I don't take bags anymore and fly ultra light to avoid the add on fees.   If you think about the bag fees, you might consider bringing a backpack with only a few pairs of clothes and simply buy more at the destination or washing them in the hotel for $3. At $50 fees per bag. that's a lot of "I Love NY" T-shirts you can buy and wear.
Apr 11, 2014 9:11PM
If Spirit is so hated why do so many still fly it?  Confucius say:  Most profitable airline screws the passenger the most by cutting services and increasing profits.

It's a no brainer.
Apr 11, 2014 9:24PM
I have flown Spirit many times. And, while waiting in the boarding area, other passengers
are always complaining about Spirit.

However, the flights are always at least 98% full.  Why ?  Because even with all the extra
fees, Spirit is still by far the cheapest way to fly. And that is why the planes are full.
So people are talking with their wallet and continuing to fly Spirit.

Apr 11, 2014 8:47PM

At 6'-5", I won't be flying Espirit.  If offer a seat with 125% pitch for 125% ticket price, I'm on board.

I like that they charge for overhead bin space.  Pay for what you use is the name of the game.

Apr 11, 2014 8:39PM
I think they are fine.  Travelled down south last year and used them for the first time.  They were on time each flight, courteous, and friendly.  I had no issues and plan to use them again.
Apr 11, 2014 9:02PM
Funny. Verizon too has declared 2014 the year of the customer. And like Spirit. It doesn't plan on improving anything. It still won't hire new workers to help with work load so customers will still wait a week to get their phones working. Won't invest any money into the plant so even if they did hire new workers, they wouldn't be able to help the customer anyway.  It also plans on raising rates because second on the list is drive profits.
Apr 12, 2014 10:35AM
Some ask the question, "why do so many people fly Spirit even though they are not liked?" It's simple economics. These days passengers are only loyal to their wallets!  Years ago there used to be product loyalty prior to deregulation when the major airlines didn't have to "dumb down" and eliminate premium services in order to compete against the "new generation" discount airlines. Airline flying was never mean't for everyone as depicted by the class of people, good manners and appropriate travel attire we usually saw. Now the skies are full of "flea market folks" in aging cattle cars with wings.  It's a good thing Bill Boeing, Juan Tripp, Eddie Rickenbacker and others didn't see what happened to the airline industry.   
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