Fees Will Remain, But Other Changes Coming to Spirit
There has been plenty of speculation about whether or not the new CEO of Spirit Airlines, Bob Fornaro, will do away with some of the many fees that his carrier charges. Former CEO Ben Baldanza, who left unexpectedly last month, was outspoken about his desire to keep the airline’s fee structure, which many people considered excessive, in place. Will Fornaro be any different?
Spirit had a good year in 2015, but its stock price still fell. Now that oil prices are low, other airlines have been able to match (or almost match) Spirit’s fares on competitive routes. Also, the ultra-budget carrier has developed a reputation for unreliability, having been plagued by delays, cancelations and problems with lost luggage.
Changes are obviously necessary, not only if Spirit wants to remain competitive, but if it wants to keep the faith of its stock holders. Fornaro did say that changes were coming to Spirit, but all those fees will remain intact. In a recent earnings conference call, Fornaro stood by the fees, but said that service had to be improved. “Reputation does matter… The kind of complaints we want to remove is when we lose the bag we don't recover. Or when we have a four-hour delay and we don't get the customer where they need to go.”
The right CEO for the job?
A more customer-oriented stance seems to be the main difference between Fornaro and his predecessor. Baldanza relished the fact that Spirit could still draw customers with ultra-low fares even amid complaints about its poor service and excessive fees. Fornaro has been a CEO before. He headed AirTran for four years before it merged with Southwest. During this time, AirTran become known as one of the best low-cost carriers in terms of customer service.
The focus on improving basic customer service is certainly necessary. As fuel prices fall, legacy carriers and other low cost carriers are able to match Spirit’s fares on certain routes. Even if they can’t come up with the same price tag, competitors can advertise cheaper overall journeys after Spirit’s fees are added into the equation.
Change needed in order to compete
Legacy carriers, in particular, are certainly well aware of Spirit’s struggles on the lost baggage and canceled flight fronts. The big airlines have comparatively fewer fees and they have been taking small customer-friendly steps, such as adding snack service to domestic flights, just to remind fliers that they can get a more full-service experience. Spirit’s recent struggles are certainly hurting it when it comes to this kind of competition.
The other thing that Spirit is planning to do is to focus more on small and mid-sized markets that their larger competitors are pulling out of. This is another formula that Fornaro applied successfully at AirTran. On some of these underserved routes, it would be competing with airlines like Allegiant, which has a similar fee-heavy business model.
Spirit will be making some significant changes. However, the one change that everyone was hoping for, dropping some of its fees, will not be happening anytime soon.
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