Can Spirit Ever Improve Its Poor On-Time Performance?
Photo courtesy of Spirit Airlines
Spirit Airlines has developed a strong reputation for lagging behind the competition when it comes on-time performance and customer satisfaction. CEO Bob Fornaro, who took over at the beginning of this year, has promised to improve the airline, however, Spirit's business model will make it almost impossible for the low-cost carrier carrier to match its peers when it comes to arriving at the gate on time.
Getting better, but still in last place
68 percent of Spirit’s flights arrived on time for the year ending April 2016. In April, however, it showed some improvement with 73.8 percent of its flights arriving on time. Monthly averages for the industry as a whole are usually above 80 percent, so Spirit is still lagging well behind its competitors.
However, Fornaro did make some changes that could help his brand make incremental improvements. Under previous CEO Ben Baldanza, 10 percent of executives bonuses depended on the airline’s punctuality. Fornaro has bumped that up to 20 percent, meaning execs have a significant financial reason to organize things so more flights leave and arrive on time.
Being on time costs money
There is a catch to this, however. Airlines with high on-time performance usually spend more time on the ground making sure that everything is ideal before takeoff. Doing this means paying ground and flights crews for time that they aren’t actually in the air. Also, more time in the air and less on the ground means that an airline is making more revenue. Every minute on the ground is actually increasing operating costs, something that Spirit wants to avoid.
Spirit contends that some airlines “buy” high on-time ratings by adding “padding” to their schedule. A flight from MSP to Chicago O’Hare, for example, takes about an hour. However, an airline might have a scheduled flight time of one hour and 40 minutes. This will assure them of having the flight arrive on time, but it will also cut into revenue because it will force the airline to schedule fewer flights during the day and to wait on the ground until the next flight is ready for boarding.
Slow, steady improvements
Spirit has one of the lowest average operating costs in the industry. According to Bloomberg, Spirit’s cost per available seat mile sits at 7.3¢, well below every other carrier except Allegiant, which has even more problems than Spirit when it comes to customer satisfaction.
Reaching the same level of on-time performance as industry leaders like Delta and Hawaiian (and even much-improved LCC Frontier) would most likely raise Spirit's operating costs. This could, in turn, force it to raise its low fares, which are really the only positives that it can offer fliers at this time.
Despite this, Fornaro is confident that improvements can be made… in small steps. The CEO said he hopes that by the end of 2016, Spirit’s on-time performance will be near 80 percent. That is still below average, but much more respectable than the dismal sub-70 percent mark of 2015. He went on to promise that “next year at this time we’re going to run a very reliable operation.”
The question is: how much revenue will Spirit be willing to sacrifice in order to improve its on-time performance, and how much will this affect its fares?
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