Spirit Airlines (SAVE) isn't making a lot of friends these days. If anything, the low-cost carrier might be writing the beginning chapters of a what-not-to-do manual for corporations.
Here's a summary:
- Categorically tell a former Marine who's dying of cancer you will not refund the ticket he bought, even though his doctor told him not to fly.
- More than double certain carry-on bag fees, since you're an airline who caters to people who don't want to or can't spend a lot of money.
- Tell folks who have a problem with it to get over it.
Now, no company of any size and in any business, publicly traded or otherwise, is required to be "nice." Corporations, one can certainly and fairly argue, exist at the most basic level to provide a good or service and to make a profit.
Still, at the end of the day, companies have actual real people as employees. And if you're the type of person who thinks most people are decent, you might assume those employees want the place they work to be interested in doing the right thing -- even if that means sacrificing a little profit every now and then. Let's take a look at what's transpiring at the Miramar, Fla.-based discount airline.
A 76-year-old Vietnam veteran named Jerry Meekins bought a Florida-to-Atlantic City ticket to visit his daughter. He paid $197. Meekins has esophageal cancer, and it's going to kill him. He already knew he had cancer, but he found out he was terminally ill after he purchased the ticket. His doctor advised him to avoid the flight because he's too sick.
Naturally, Meekins went to Spirit and asked for a refund. His version of events is that the airline basically said that's a shame, but you're not getting a refund. Here's the thing -- that's also effectively Spirit's version of events.
Ben Baldanza, the chief executive of Spirit, told FoxNews.com why Meekins won't be getting his money back: He should have bought insurance. "A lot of our customers buy that insurance and what Mr. Meekins asked us to do was essentially give him the benefit of that insurance when he didn't purchase the insurance," Baldanza said, according to the web site. "Had we done that, I think it really would've been cheating all the people who actually bought the insurance ... and I think that's fundamentally unfair."
The report goes on to quote Baldanza further. "We feel very badly for Mr. Meekins, however, this is a country and society where we kind of play by the rules. And he wanted to really not do that and that's really not fair to the 10 million other Spirit customers and that's why we made that decision."
In a way, he's absolutely correct. Rules are rules, and we need them to maintain law and order and civil society. We know this, and most of us embrace that fact. But should every rule be enforced at all times with absolutely zero room for interpretation? Depends on your perspective. If you ask Baldanza if he thinks rules are made to be broken, you're probably wasting your time.
Meekins says he was offered a credit for a future flight, but again, there remains that matter of being told by his doctor not to fly, since it could make his already grave illness even worse. He ended up driving to New Jersey to see his daughter. A Facebook page titled Boycott Spirit Airlines has more than 31,000 "Likes" as of this writing.
For the record, the same FoxNews.com report pointed out to Baldanza, citing Department of Transportation statistics, that his airline had 8.27 complaints for every 100,000 flying passengers in January, a number that was the worst in the survey and more than twice as bad as United, the No. 2 carrier on the list. Baldanza said it was "an irrelevant statistic," and suggested that, "Why don't we interpret that 99.92 [percent] of all customers have no complaints? Because that is what it says."
The Meekins story isn't all. Spirit, which has made its name with low fares, is going to begin charging $100 for carry-ons that are stowed in the overhead compartment in cases when the bags are taken care of at the gate. The old fee was $45, so count this as a double and then some. If your bag fits under the seat, no worries -- that's still going to be free. It cannot be overstated that there is nothing wrong with making money. Just that this is the kind of thing that makes "discount" less of a discount if you're not a very careful planner when it comes to flying.
Of course, fees beyond the ticket price aren't unique to Spirit by any stretch. Anyone who's flown in the last decade or so knows that a host of new costs have been required to keep airlines from going under. Fuel is extremely expensive, security measures have gone up considerably and business is business. Ignore that series of bankruptcies you might have heard about in the industry.
According to The Wall Street Journal this week, Spirit is "a leader in charging for so-called ancillary services, stripping down its fares to offer only a ticket and ignoring criticism from some politicians about a strategy that includes charging extra for carry-on bags and which helped make it among the most profitable in the global industry." A leader, no less.
These "ancillaries" made up more than 40% of Spirit's revenue in the first quarter, when it had a top line of $23.4 million. That was nearly triple the same period of the prior year. For reference, $23.4 million would buy Meekins nearly 119,000 tickets at $197 each.
Thanks to Spirit's approach and Baldanza's business sense, shareholders of Spirit have been rewarded in a big way. When Spirit was newly public in May 2011, it was trading in the $11 a share range. It's now above $22, so anyone's who has had it for a year has doubled that original investment. However, the shares are down about 3% this week.
Investors have gotten a clear payoff, and they've been treated right by Baldanza and his team. No two ways about that. But have customers? At the risk of sounding somewhat Occupy Wall Streety, the case of Spirit, and in particular its handling of the Meekins matter, might make all of us do a little thinking.
Now we want to hear from you. Is Baldanza right, or should Meekins get a refund? Or what about the bag fees? Would either of these situations affect your opinion on whether to fly Spirit?
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