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Monday, April 21, 2014

Strategic CSR - Spirit Airlines

We, as consumers, are very difficult to understand. Without us, no company competing in the consumer market can survive. Yet, in spite of this, we often fail to reward the products and services that we say we seek. The latest example of this is found in the article in the url below, which reports on the cutthroat airline industry:
“Spirit Airlines inspires a special kind of wrath among the American traveling public: It's the industry leader in customer complaints by a wide margin. Over the last five years, Spirit's rate of complaints to the Department of Transportation was three times higher than other U.S. airlines. … In spite of the rancor it inspires, Spirit has become the most profitable U.S. airline in terms of its operating margin and return on invested capital. Spirit's 16.2 percent margin is highest among U.S. public airlines, as is its 26 percent return on capital, according to data compiled by Bloomberg.”
Things have become so bad that Spirit is famous for being bad at what it does:
“The loathing has also inspired a dedicated Twitter feed: @hatespiritair
How does Spirit do it?
“Spirit, along with other ultralow-cost carriers, has done all it can to drive ticket prices as close to zero as possible. The point is to attract new customers with low fares, then squeeze them into a spartan, cramped cabin and charge them for any and all amenities: water, carry-on bags, seat assignments, and the like. Spirit's planes pack far more seats in the cabin than do other airlines, 178 on an Airbus A320 -- that's 28 more than on the same plane at United Airlines or JetBlue. And Spirit's seats don't recline.”
It is hard to have any sympathy. If we really care about the level of service an airline offers, we need to be willing to pay for it. If we keep being tricked into paying the absolute lowest sticker price, when we have had poor service in the past, then we really do not have anyone to blame but ourselves. More importantly, of course, what message are we sending to firms? Why should they care about customer service if we obviously do not care ourselves?
Take care
David Chandler & Bill Werther
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The most hated US airline is also the most profitable
By Justin Bachman
April 10, 2014
Bloomberg Businessweek