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.
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
Oh the schizophrenia !!
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.
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.
Basically, THEY SUCK IN EVERY WAY!
Fool me once but not TWICE!
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.
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.
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.
Copyright © 2014 Microsoft. All rights reserved.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.