Most hated is most profitable

By  via businessweek.com   Article

The Most Hated U.S. Airline Is Also the Most Profitable

Spirit Airlines (SAVE) 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 ….

This is not the first time Spirit has been dinged for customer dissatisfaction. Last year it was the lowest-scoring carrier in a Consumer Reports survey of 16,000 readers. ‘Poor service, poor communication, poor quality,’ a commenter at airline-rating firm Skytrax wrote this week. ‘You couldn’t even make up how bad they are.’

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. …  Spirit shares have gained 439 percent since its mid-2011 public offering at $12.

the low-cost model rightly treats airfare as a utility. ‘There really does not need to be a service component attached to consuming airfare.’ To that end, 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 anAirbus (AIR:FP) A320—that’s 28 more than on the same plane at United Airlines(UAL) or JetBlue. And Spirit’s seats don’t recline.

On the flip side of this financial success, Spirit is still growing rapidly. It plans to almost triple its 54-jet fleet by 2021.”

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