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Spirit Airlines is experiencing pressure in certain markets from flyers who aren’t interested in paying extra bag or change fees.
Part of the problem could be bargain fares attracting travelers without the money to spend on ancillary products, according to executives on the company’s latest earnings call.
But don’t expect the ultra low-cost pioneer to move away from aggressively selling add-ons to flyers.
“Eventually we will see some upward movement in prices, [but there is] generally some resistance to [saying] ancillaries may go away,” said Spirit Airlines CEO Robert Fornaro. “But I also think, again, there’ll be more initiatives. Again, we don’t have a mobile website and we’ve locked down our entire web system… for pretty much for the last six to nine months. We’ve really held off on doing a number of things we need to keep that base rate steady.”
Additional pressure from legacy carriers cutting economy fare prices and charging for amenities may be pushing customers that would ordinarily pay fees away from Spirit.
“Leisure bookings and leisure market looks pretty strong, but what happens is, the carriers will move down the food chain,” said Fornaro. “In other words, if I can’t replace a $500 customer or if the customer disappears or moves down to the $300 bucket, ultimately they might move down to the $100 bucket. That’s probably what’s going on and to some degree that’s why you’re seeing some of the [low] pricing go into some of the legacy hubs.”
Fornaro said Spirit’s strategy of constraining spending and pushing fares downward won’t change even as the big U.S. airlines mimic its approach in certain markets.
“There is really no large market in the country that I think is going to not have [ultra low-cost] pricing,” said Fornaro. “I mean, legacy carriers cannot optimally price the large markets. It wasn’t true 20 years ago and it’s really not true today, and we’ve established the position in those key markets. As we go… you will see some more of the mid-size market initiatives.”
“Our strategy is to charge for bags, so a customer can complain, ‘I don’t like that you charge for bags.’ That still counts as a complaint,” said Fornaro. “We are not going to be able to remove that, because that’s strategic decision… There’s a number of airlines who have done a very, very good job over time [limiting complaints] and this is probably a place where being like other carriers can be an advantage.”