The Spittle in Spirit Airlines
Update (October 2016): I just purchased a round trip to NYC for $92.
As both a passenger and investor I find Spirit Airlines to be compelling and frustrating. On the positive side I am amazed that I can now day trip from South Florida to New York City for less than $200. Spirit has 4 nonstop flights each way from Fort Lauderdale to LaGuardia and another 4 each way to Newark.
I have taken day trips to NYC for afternoon business meetings and also done a couple all-nighters when I had morning meetings. If you do it right, you can save a huge amount of money. Today I was looking at a round trip for about $166 including everything.
As an investor, the company is trading at a low price-earnings ratio of less than 9. On first thoughts, you’d be much better off if you were to buy google shares uk. And maybe that would’s true. But, while they have substantial debt, their debt-equity ratio is about half the industry average. It is considered an “ultra low cost carrier” (ULCC) – their operating structure allows them to keep their costs very low compared to others. That makes them very competitive on price and also profitable. With all that, the business should grow and perform well.
The planes are also the newest of any airline and that makes them safer, cleaner and more efficient.
With that said the negatives are huge. Spirit is the most unpleasant airline I have ever flown. The seats are so uncomfortable my butt hurt after my first flight. I bought a seat cushion just for Spirit. It is arguably more pleasant to ride the subway in New York.
Spirit works well if you play the game. There are many extra fees if you’re not careful. Keys to saving money: Book online, travel very light (only one small bag), and take whatever seat they give you. There’s no free food or beverages on the flight but the prices are cheaper than what you’ll pay in the airport. You can’t bring any drinks with you through TSA but you can bring a sandwich or other food if you want to save a little more. Or just don’t eat. There’s no WiFi on the plane either.
Customer service is highly variable. So far on every flight the pilot and flight attendants have been excellent.
The ground crew and phone staff have been the opposite. The airline seems to have made a deliberate decision to hire people who speak English poorly with strong accents and put them in charge of the microphones. On one occasion I was waiting for my flight and there was a series of announcements I did not understand. An older gentleman sitting near me was swearing up and down how he couldn’t get a word. I wasn’t doing much better.
All of a sudden a bunch of people left the gate area. We didn’t know why. It later turned out that the flight before us had been moved to another gate. People missed that flight because the communication was so poor. It was the last flight of the day to that city.
And that leads to my most recent experience. On another trip I was bumped from my flight and was told I’d get a free voucher for a future round-trip. The deadline to use the voucher was short and I just booked a flight for December. It turns out that the “voucher” was misleading. This is what it said:
Please Accept This Voucher for the Inconvenience
Hi WARREN. We’re really sorry that we couldn’t get you on your flight. We care about your satisfaction and want to make this right.
Please accept our apologies along with this voucher for future travel to any of our destinations.
…
You may use your voucher by calling Reservations at 1.801.401.2222, Option 3. Provide your information at each of the prompts and tell the representative that you are redeeming the voucher.
It was accompanied by some fine print including what the voucher doesn’t cover:
…
*The voucher expiration date cannot be extended or changed and does not cover taxes and optional services.
*The voucher is applicable to the flight-only portion of the base fare and cannot be redeemed for bags and other optional services.
…
*Vouchers cannot be applied to the following government taxes, fees and carrier optional services: (a) a segment tax of $4.00 per U.S. domestic flight segments (a flight segment is defined as one takeoff and landing) of a Customer’s itinerary; (b) up to $18.00 for local airport passenger facility charges (c) a September 11th Security Fee of $5.60 per enplanement originating at a U.S. airport; (d) a Passenger Usage Fee of up to $17.99 per one way travel per traveling customer applies to most reservations excluding bookings completed at Spirit Airlines’ airport locations as well as certain bookings to or from Colombia. A lower fee of $8.99 may apply to certain discount fares. …
So I called today to book a flight. If I was booking online without the voucher it would have cost the $166 I mentioned above:
When I was booking I was told I would have to pay $100 to cover everything not included with the voucher. I asked for a breakdown of the $100 and never got a clear answer. The rep I dealt with had a strong accent and spoke too fast (and I’m a New Yorker). She eventually waived the $25 fee for booking over the phone.
Ultimately it cost me $75 to book my “free” flight. Notice from the image above that the online breakdown only shows the government’s cut at $35. I genuinely believe Spirit just screwed me on that extra $40. That could lead to class action lawsuit against Spirit so as a shareholder I hope they’ll be more careful about this in the future.
Despite my complaints, I will keep flying Spirit, hold my stock and possibly buy more. The business model is compelling to me as both a passenger and investor. At the same time I worry that most passengers will not be willing to put up with all the hassles, especially when there are options like empty leg flights which mean you can have all the benefits of flying privately but without the usual price tag. Still, most people will keep flying commercially which is good news for Spirit.
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