Was it really that convenient though?
Turns out, cheap airfare isn’t enough to keep Spirit Airlines going! They have stopped all operations recently, so let’s talk about why!
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The Marketing Gateway is a weekly podcast hosted by Sean in St. Louis (Sean J. Jordan, President of https://www.researchplan.com/) and featuring guests from the St. Louis area and beyond.
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TRANSCRIPT:
I’m not sure if you heard the news, but Spirit Airlines, that yellow and black colored discount airline almost nobody likes to fly voluntarily, is permanently grounded. And I don’t just mean they’re taking a moment to figure out how to get things flying again, but they are done. Kaput. Out of business.
As of May 2nd, Spirit announced what they call “an orderly wind-down of our operations” but which of course means there are passengers who are stranded either midway through their journey or who showed up to the airport last Friday, May 1st, only to discover unfolding chaos.
One story in People magazine details a wedding photographer named India Jade McCue who was stuck in Orlando, Florida after a conference and who was trying to fly back to Colombus, Ohio to shoot a client’s wedding on Saturday the 2nd. She arrived at the airport on time and was assured by Spirit employees that all was well. But Spirit flights started getting cancelled, and the passengers bound for Columbus started to get worried that theirs was next.
In McCue’s now-viral Instagram video, you can hear the crowd in the airport groaning as the announcement goes up that the flight she and her 175 fellow passengers is cancelled. She explains in the video that everyone was being rebooked onto Spirit flights for the next day, but she seems to know in the video that Spirit would be announcing the next morning it would be ceasing operations.
But she also says in the piece that no one at Spirit seemed to have clear answers about what was happening – they were being told there were staffing issues or weather delays, but it was dawning on them that they were going to be out of a job the next day and simply trying to keep their composure. And while McCue was able to rebook herself on a Southwest flight for about three times what her Spirit flight had cost and make it to her job on Saturday, several news sources report that other airlines started charging higher prices due to the surge in rebookings, up as much as 14% and that routes where Spirit was flying are expected to see a price increase over the summer due to higher demand for what’s left.
JetBlue has been promoting a rescue fare for $99 to affected Spirit passengers, but keep in mind that this is a temporary offer that only extends through today and that JetBlue and Spirit have a bit of a history together – they tried to merge in 2024 to save Spirit Airlines and create the fifth largest airline, but the Department of Justice blocked it with an antitrust case. And JetBlue is among the airlines many analysts expect to head into bankruptcy next along with Frontier and Avelo.
So, what caused all this chaos? There’s plenty of finger-pointing, and Spirit has blamed the collapse on the cost of fuel, which is up to more than double their projected costs for the year thanks to the Iran War.
But many airline insiders seem to agree on one particular problem.
Nobody could beat Spirit Airlines for lousy customer service.
And that’s a marketing problem if I ever heard one, so we’re gonna talk about it!
I’m Sean in St. Louis, and this is the Marketing Gateway.
Pricing is, if you remember, one of the central tactics in marketing, and Spirit Airlines has always competed on price by offering absurdly low fares to fliers so they can keep their flights full along the limited routes they fly.
But airline pricing is a little tricky to understand from the outside because it’s often so contingent on when you book and how in demand seats on a particular flight are, so here’s a quick primer on how the airline business works. Commercial airliners are basically giant tubes with wings and tails to make them steerable and engines to propel them through the air. Those tubes have to carry enough fuel to make it from start to finish as well as have enough available for diversions, delays, contingencies and even ballast. The passengers, luggage and other cargo also add to the amount of weight a plane has to carry and this is all calculated into how much fuel that tube needs to get up in the air.
So, it’s not too hard to figure out the cost of a flight. Spirit Airlines flew a lot of Airbus A320s, which is a twinjet model that can fly somewhere around 140 to 180 passengers on a normal flight. I found a calculation that says the A320 costs, on average, around $10,800 per flight hour to keep in the air, and so that would mean for every hour, passengers would need to spend an average of $60-80 on a fully booked flight per hour for their fare just for the airline to break even. That’s not including other costs, like staffing, maintenance and operations, by the way. And it also doesn’t include a sudden rise in fuel costs, which are the biggest expense of flying by far.
But even so, it’s a starting point for understanding your actual costs, and if you want to make a profit, you increase fare prices and offset them with amenities like snacks, beverages and entertainment. And if you want to improve your profitability, you can charge for bags, amenities and upgrades. You can also offer more desirable seats for higher prices or offer first class and business class fares for less price-sensitive fliers. And of course if a flight is in demand, you raise fares because you’ll probably still fill seats at those higher prices, and if it’s not in demand, you lower fares to attract more cost-conscious fliers.
Sounds reasonable, right? But on an A320, there’s a big difference between a plane with 140 seats and 180 seats, and that difference is the space each passenger has. And Spirit was known for squeezing passengers down to the smallest spaces possible to offer its discount fares. Spirit also behaved like a lot of discount airlines by adding fees for every single one of its amenities, including carry-on bags, checked luggage, airport check-in and boarding pass printing, seat selection, refreshments, bringing pets aboard and unaccompanied minors, among other things. And Spirit would encourage you to pay these fees up front at booking rather than at the time of service by giving you a discount to do so.
So if you found a Spirit fare for a low, low price – sometimes as low as $26 one way, from what I’ve seen online! – you’d either have to optimize the trip to preserve that fare and put up with a lot of discomfort and restrictions to keep it, or you’d have to pay more to get a better experience. And again, this is true on any discount airline – Frontier, Allegiant, Breeze, JetBlue and Avelo are some of the many airlines who use similar pricing models.
And if it sounds like a fun adventure to see how well you can endure a very probably terrible flight experience to get a good deal, congrats, you’re like a lot of first-time Spirit customers! Unfortunately, a lot of actual Spirit customers hated the experience. The seats were too close together, the customer service was nonexistent and the gate agents were incentivized to force people to check larger carry-ons so that more bag fees could be charged.
Spirit also had a problem with cancellations and on-time arrivals, often providing little support to stuck or stranded passengers. Much like Southwest Airlines in 2022, Spirit Airlines had a major meltdown back in August of 2021 that resulted in over 2,000 flights being cancelled. And then it had another surge of cancellations in the Spring of 2022.
One article from CNN Business quotes Michael Taylor at JD Power as saying, “A low percentage of passengers said they would fly the airline again after their most recent experience” and “There will always be a market for airlines that offer the lowest fares possible. The question is: are they making the pizza too cheap to eat?”
And that same article quotes Zach Griff of the airline newsletter From the Tray Table as saying, “They stripped out so much from the experience … that the folks who ended up stuck on Spirit often kind of despised the experience. And they often were willing to pay $30, $40 $50, even $60 more just to have better experience on a different airline.”
Spirit was also notorious for its very provocative ads in the 2010s, including one that attempted to poke fun at the Deepwater Horizon disaster, another that tried to ride the coattails of the Anthony Weiner sexting scandal, and another that offered a “MILF Sale” which the ad said meant “Many Islands, Low Fares” but which was definitely a double-entendre for the more common use of that acronym, sexy moms.
Spirit’s latest Hail Mary promotion was to offer a premium tier of service called the Big Front Seat where passengers could buy seats with more leg room and reclining capabilities in the front of the cabin along with priority boarding and free bags. So, basically, what any other airline would consider slightly above standard service, but in limited supply and not premium enough to attract a lot of new fliers.
So it’s easy to understand why Spirit has long enjoyed a terrible reputation as an airline of last resort for many fliers and as a favorite mainly for cheapskates who like to optimize their travel budgets.
But there’s a place for discount airlines, and one of those is that’s for people who need to travel on predictable routes and who don’t need a lot of amenities. In fact, there’s another story that ran in People this week about a woman named Nancy Kaffer who successfully had a long-distance relationship with her now-husband while he lived in Pennsylvania and she lived in Detroit because those $99 Spirit flights he was able to book through Baltimore allowed him to come and see her every other week. That’s a sweet story! But it’s also a very atypical way of being an airline customer.
Another place for discount airlines is for the cash-strapped consumer who wants to take a vacation to a popular destination like Las Vegas or Orlando but can’t afford to fly on a Big Four airline like Delta, American, Southwest or United. These consumers aren’t usually vocal about air travel woes because they don’t fly very often and don’t have high expectations when they know they’re getting a cheap fare. Ask them if they’ll fly an airline like Spirit again and the question doesn’t even make sense – who knows when they’ll fly again? Chances are good when they do, rock-bottom fares are going to be the difference between “I am going on a trip” and “I’m not going anywhere.”
That might explain why there’s a crowdfunding effort on TikTok right now to save Spirit Airlines – which is something the US government opted not to do with a bailout. A TikTok influencer named Hunter Peterson made a video suggesting people pledge to save Spirit Airlines, and over the weekend, a website called Letsbuyspiritair.com went up asking for pledges as low as $45 to turn Spirit into a community-owned organization like the Green Bay Packers, Ocean Spray, REI, Land O’Lakes or WinCo Foods. Pledging more entitles you to a larger profit share if this idea goes through, you see. But you get the same voting rights in the community governance at either level!
As of the time I’m recording this, they claim to have raised $132 million from 133,508 people with an average pledge size of $989.
That’s pretty impressive for a movement that’s been in existence for less than a week!
Am I skeptical? Yes. Will a community-owned airline ever be feasible? Probably not, because Spirit has been a publicly-traded corporation and it’s lost billions of dollars in the last several years. Again, and I cannot underscore this point enough, it’s because the company focused so much on using cheap fares as its key differentiator that it’s not only been through two bankruptcies and two failed mergers, but also has made a lot of people miserable along the way.
But one airline that has turned things around in recent years is United Airlines. Under the leadership of CEO Scott Kirby, they’ve become something of a darling in the airline industry because they prioritized customer experience over pricing under the assumption that if you offer a superior service, people will pay more for it.
This meant doing things like ditching the smaller planes, putting Starlink wi-fi and seat back screens on their jets, improving their systems to reduce delays, improve the chances of making connections and give gate agents better information about when flights would actually be departing, and improved their website and booking app to go from being some of the worst in the industry to some of the best.
The other major carrier who’s chosen to focus on customer experience is Delta, and while their moves haven’t been quite as dramatic, they have been popular. When you compare United and Delta to discount airlines, you’ll see a huge difference not just in customer satisfaction, but also operational performance and profitability. Better customer experience is worth paying a little more for, and when customers know they’re going to receive a decent level of service for a fare increase of $50-100, that actually is something they’re willing to spend more on than, say, getting socked with a fee for a bag they thought they could carry on the plane or having to pay to print a boarding pass at a gate agent kiosk.
Customer service is a winning strategy, and the proof is in the profitability.
According to an article posted on Forbes yesterday by marketing commentator Roger Dooley, last year, United and Delta took home 90% of the US airline industry’s profits.
But as for Spirit? Making excuses about fuel cost increases or the Biden administration’s opposition to a merger with JetBlue or the problems within industry itself has brought home nothing but rolled eyes from annoyed customers whose flights have been cancelled and whose travel plans have been disrupted. It’s put thousands of employees out of work, it’s reduced the number of options for air travelers and turned the company into yet another case study for what it looks like for a decades-old business to fail.
And that’s why betting on low-price strategies tends to fail over time. For awhile, you’re beloved for showing the world just how much markup there is on the premium experience. You may even help keep costs down in your category and make people happy for awhile.
But in the end, your focus on price instead of customer experience is going to catch up with you when the only way to keep prices low is to make the product or service offering so intolerable that it’s not worth the trouble anymore. And that’s exactly what Spirit did to itself, and probably JetBlue and Frontier, too, if we’re being honest.
So, so long, Spirit Airlines, and if you do come back as a company owned by TikTokers, I hope you’ll find a better path to profitability so you can take off once more. But here’s my suggestion to those new owners:
Focus on the customer experience first, and the rest will follow.
I’m Sean in St. Louis, and this has been The Marketing Gateway. See ya next time!
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