Spirit Airlines transforms budget airlines

Global Business

Spirit Airlines’ a la carte style has changed the airline industry model of the U.S. to become the most profitable and complained about budget airline.

CCTV America’s Nitza Soledad Perez reported this story from Miami.

Spirit Airlines transforms budget airlines

Spirit Airlines' a la carte style has changed the airline industry model of the U.S. to become the most profitable and complained about budget airline.

Spirit Airlines has returned from the fringes of bankruptcy to become an industry leader — by charging for everything from boarding passes to water.

“We’ve been able to make money because we keep our costs very low, because we do things in way that help that happen,” said Spirit Airlines CEO Ben Baldanza. “We put more seats in our planes than our competitors, for example. Just like when you carpool, everybody splits the cost of gas.”

Baldanza said that the airline caters to a different kind of passenger.

“What Spirit does and it is very important to know is that they take people that travel by train, by bus, and in their own car, not so much people from another airlines,” Oscar Garcia, chairman of an aviation consultancy, said. “It is people that before didn’t fly and now they can fly because it is very cheap.”

Spirit travels short distances, its seats do not recline, and there is no in-flight entertainment. The airline’s net income in 2013 was $177.5 million, making it the most profitable airline in the country.

According to the U.S. Department of Transportation, Spirit fares are 40 percent cheaper than those of competing airlines. This is true if passengers don’t take too many bags — carry on baggage can cost you up to $50 if you didn’t purchase it before coming to the airport.

That’s one of the reasons this budget airline also holds a unique distinction as the leader in customer complaints.

“The price is nice, but all that nickel and diming, they should do something about that,” said Spirit customer Vincent Paladino.

Despite the bad reviews, investors appreciate the low cost carrier’s numbers. Three years ago, Spirit stock traded at about $12 a share. It currently stands at around $75.

“If you come to Spirit, and you bought a ticket on Spirit because you really liked the fare, but then you expect to get what you get on American Airlines, or at Delta, you will be disappointed and we don’t want people disappointed that way,” Baldanza said. “We offer a specific value proposition, which is a low price where you want to go. That requires some compromises to make that price work for us.”

Baldanza expects even cheaper fares due to low fuel prices. And despite the complaints, the business model is working. Spirit is expanding its fleet with 15 new planes and adding more international routes.