Spirit Airlines operates as an ultra-low cost carrier, offering low base fares while charging fees for extras like checked bags and onboard food. It focuses on price-sensitive leisure travelers and maintains low costs through high aircraft utilization, selling most tickets online, and packing more seats on planes. While passengers complain about fees, Spirit has consistently high load factors as customers prioritize low fares. It faces some competition from American and JetBlue on overlapping routes to the Caribbean and Latin America.
This document provides an executive summary and analysis of Spirit Airlines. It discusses the company's history and transformation into an ultra-low cost carrier under new ownership in 2005. The report evaluates Spirit qualitatively, examining its management, competitive environment, and challenges. It also analyzes quantitative financial data compared to Southwest Airlines. The summary aims to give a multi-faceted perspective on Spirit Airlines and provide valuable information for potential investors.
Southwest History and GrowthCorporate Level Strategy.docxrafbolet0
Southwest Airlines has achieved success through a low-cost strategy focused on short-haul flights using only Boeing 737 aircraft. Key aspects of Southwest's strategy include no baggage fees, no change fees, no meal service, and no assigned seating. This keeps costs low and allows for quick turnarounds. Southwest also emphasizes excellent customer service and a friendly culture for both customers and employees. This strategy has helped Southwest gain significant market share through high customer satisfaction and loyalty.
This document provides an analysis of Southwest Airlines' internal strengths by examining its competencies, resources, and key financial ratios over the past three years. The internal analysis looks at Southwest's current ratio, debt-to-equity ratio, fixed assets turnover, and gross profit margin to evaluate areas where the company is performing well and areas that could be improved. Overall, the ratios show some upward and downward trends from 2014 to 2016, indicating mixed performance in different aspects of the company's financial position and operations.
- Travel fees continue to rise across industries like airlines, hotels, rental cars and cruises as companies try to maximize profits. Fees are charged for things like baggage, seat selection, WiFi and amenities that were previously included.
- Some airlines like Ryanair are considering more extreme options like charging for airplane bathrooms and vertical seating to fit more passengers on flights. However, others like Virgin America are not as focused on fees and extra charges.
- As the trend toward more travel fees progresses, companies must adapt their marketing strategies to address the à la carte nature of travel costs and packages. Hotels especially are profiting greatly from service fees but must market different room rates accordingly.
Case study presentation on marketing managementNakib Khan
Southwest Airlines has traditionally had a low cost structure allowing it to offer lower fares than competitors, but as other airlines adopt similar business models the cost gap is shrinking. Issues like rising baggage handling times due to increased passengers and higher fuel costs are also challenging Southwest's low cost advantage. The document recommends strategies like improving routes and providing in-flight entertainment to help Southwest adapt to increased competition in the airline industry.
Southwest Airlines is the largest domestic carrier in the US based on passengers carried. It was founded in 1971 with a mission of providing low-cost, high-frequency, point-to-point flights. Southwest pioneered many customer-friendly policies like online booking and ticketless travel. It focuses on strong customer service and loyalty through low fares and programs like Rapid Rewards. Southwest uses a point-to-point routing on a single aircraft type to keep costs low and efficiency high.
SouthWest
SouthWest
Company name, website and industry
The company I would be analyzing is Southwest Airlines which operates in the Airline industry. The website of the company is https://www.southwest.com.
Background and history of southwest Airlines
Southwest Airlines was founded in 1967 and it stands as the premier low-cost air carrier in the United States. The company was incorporated by Rollin King and Herb Kelleher on March 16, 1967 (Lauer, 2010). As of 2013, the company had a fleet of 579 planes and flies between eighty-nine destinations. It has the reputation of being the highest utilized airline by American citizens for domestic flights with an operation of about 3,400 flights each day. In 2012, the company had an annual revenue of $17 billion (Hill & Jones, 2013). Its current chief executive officer is Gary C. Kelly who has received several honors, including being the best CEO in the US for 2008, 2009 and 2010 (Hill & Jones, 2013).
Analysis of Southwest Airlines using Porter’s Five Forces Model
Competitive rivalry-High. Southwest Airline’s direct competitors comprise of six major low-carriers operating in the domestic market with similar services such as Delta Air Lines, American Airlines, United Continental Holdings, JetBlue Airways, US Airways Groups and Allegiant Travel. This offers a strong competition., considering their operation in the domestic market and provision of similar competitive packages such as low-cost flights (Flouris & Oswald, 2016).
Threat of new entrants-Moderate. New low cost Airline firms could enter the industry and attract customers. As much as entry into the market is minimized by the huge capital investments required for venturing into the industry, there are no barriers to entry (Flouris & Oswald, 2016).
Bargaining power of suppliers-High. Planes suppliers in the industry include Airbus and Boeing. Supply of fuel in the Airline industry is extremely volatile and unpredictable. This makes the bargaining power of suppliers high.
Bargaining power of buyers-High. Most of the competitors or low cost carriers in the industry offers similar services and limited differentiation. Buyers have a high bargaining power due to availability of alternatives with similar benefits. In order to address the high buyers’ bargaining power, the company can decide on less cancelations, lower price, fewer delays and more amenities (Flouris & Oswald, 2016).
Threat of substitutes-Low. Alternative means of transport such as vehicles, ship and train do not significantly compete with air transport owing to their high speed, comfort and time savings.
Strategy used
Michael Porter presented generic strategies that can be employed by a company to overcome the five forces and accomplish competitive advantage. The first strategy presented is the overall cost leadership which is based on creating a low-cost.
Company Presentation July, 2010
Gol Linhas Aéreas Inteligentes S.A. presents its strategy and financial performance. It focuses on short domestic flights in Brazil, has the lowest operating costs, and aims to benefit from upcoming major sporting events. Gol also seeks to grow ancillary revenues and international codeshare agreements while maintaining a strong balance sheet and risk management practices.
This document provides an executive summary and analysis of Spirit Airlines. It discusses the company's history and transformation into an ultra-low cost carrier under new ownership in 2005. The report evaluates Spirit qualitatively, examining its management, competitive environment, and challenges. It also analyzes quantitative financial data compared to Southwest Airlines. The summary aims to give a multi-faceted perspective on Spirit Airlines and provide valuable information for potential investors.
Southwest History and GrowthCorporate Level Strategy.docxrafbolet0
Southwest Airlines has achieved success through a low-cost strategy focused on short-haul flights using only Boeing 737 aircraft. Key aspects of Southwest's strategy include no baggage fees, no change fees, no meal service, and no assigned seating. This keeps costs low and allows for quick turnarounds. Southwest also emphasizes excellent customer service and a friendly culture for both customers and employees. This strategy has helped Southwest gain significant market share through high customer satisfaction and loyalty.
This document provides an analysis of Southwest Airlines' internal strengths by examining its competencies, resources, and key financial ratios over the past three years. The internal analysis looks at Southwest's current ratio, debt-to-equity ratio, fixed assets turnover, and gross profit margin to evaluate areas where the company is performing well and areas that could be improved. Overall, the ratios show some upward and downward trends from 2014 to 2016, indicating mixed performance in different aspects of the company's financial position and operations.
- Travel fees continue to rise across industries like airlines, hotels, rental cars and cruises as companies try to maximize profits. Fees are charged for things like baggage, seat selection, WiFi and amenities that were previously included.
- Some airlines like Ryanair are considering more extreme options like charging for airplane bathrooms and vertical seating to fit more passengers on flights. However, others like Virgin America are not as focused on fees and extra charges.
- As the trend toward more travel fees progresses, companies must adapt their marketing strategies to address the à la carte nature of travel costs and packages. Hotels especially are profiting greatly from service fees but must market different room rates accordingly.
Case study presentation on marketing managementNakib Khan
Southwest Airlines has traditionally had a low cost structure allowing it to offer lower fares than competitors, but as other airlines adopt similar business models the cost gap is shrinking. Issues like rising baggage handling times due to increased passengers and higher fuel costs are also challenging Southwest's low cost advantage. The document recommends strategies like improving routes and providing in-flight entertainment to help Southwest adapt to increased competition in the airline industry.
Southwest Airlines is the largest domestic carrier in the US based on passengers carried. It was founded in 1971 with a mission of providing low-cost, high-frequency, point-to-point flights. Southwest pioneered many customer-friendly policies like online booking and ticketless travel. It focuses on strong customer service and loyalty through low fares and programs like Rapid Rewards. Southwest uses a point-to-point routing on a single aircraft type to keep costs low and efficiency high.
SouthWest
SouthWest
Company name, website and industry
The company I would be analyzing is Southwest Airlines which operates in the Airline industry. The website of the company is https://www.southwest.com.
Background and history of southwest Airlines
Southwest Airlines was founded in 1967 and it stands as the premier low-cost air carrier in the United States. The company was incorporated by Rollin King and Herb Kelleher on March 16, 1967 (Lauer, 2010). As of 2013, the company had a fleet of 579 planes and flies between eighty-nine destinations. It has the reputation of being the highest utilized airline by American citizens for domestic flights with an operation of about 3,400 flights each day. In 2012, the company had an annual revenue of $17 billion (Hill & Jones, 2013). Its current chief executive officer is Gary C. Kelly who has received several honors, including being the best CEO in the US for 2008, 2009 and 2010 (Hill & Jones, 2013).
Analysis of Southwest Airlines using Porter’s Five Forces Model
Competitive rivalry-High. Southwest Airline’s direct competitors comprise of six major low-carriers operating in the domestic market with similar services such as Delta Air Lines, American Airlines, United Continental Holdings, JetBlue Airways, US Airways Groups and Allegiant Travel. This offers a strong competition., considering their operation in the domestic market and provision of similar competitive packages such as low-cost flights (Flouris & Oswald, 2016).
Threat of new entrants-Moderate. New low cost Airline firms could enter the industry and attract customers. As much as entry into the market is minimized by the huge capital investments required for venturing into the industry, there are no barriers to entry (Flouris & Oswald, 2016).
Bargaining power of suppliers-High. Planes suppliers in the industry include Airbus and Boeing. Supply of fuel in the Airline industry is extremely volatile and unpredictable. This makes the bargaining power of suppliers high.
Bargaining power of buyers-High. Most of the competitors or low cost carriers in the industry offers similar services and limited differentiation. Buyers have a high bargaining power due to availability of alternatives with similar benefits. In order to address the high buyers’ bargaining power, the company can decide on less cancelations, lower price, fewer delays and more amenities (Flouris & Oswald, 2016).
Threat of substitutes-Low. Alternative means of transport such as vehicles, ship and train do not significantly compete with air transport owing to their high speed, comfort and time savings.
Strategy used
Michael Porter presented generic strategies that can be employed by a company to overcome the five forces and accomplish competitive advantage. The first strategy presented is the overall cost leadership which is based on creating a low-cost.
Company Presentation July, 2010
Gol Linhas Aéreas Inteligentes S.A. presents its strategy and financial performance. It focuses on short domestic flights in Brazil, has the lowest operating costs, and aims to benefit from upcoming major sporting events. Gol also seeks to grow ancillary revenues and international codeshare agreements while maintaining a strong balance sheet and risk management practices.
This document discusses Air Deccan, India's first low-cost airline. It acknowledges those who helped with the report and thanks the college for providing a diverse learning environment. The abstract notes that Air Deccan adopted a no-frills, low-cost business model and was able to grow rapidly but also faced operational issues as it expanded. Section 1 provides background on the growth of the Indian aviation industry and low-cost carriers in India, noting Air Deccan was the first such airline and aimed to offer low fares to stimulate demand.
This document provides an overview of low-cost or low-frill airlines. It discusses the history and development of the low-cost carrier model globally, including in North America, Europe, Australia/New Zealand, Asia, and India. Key aspects of the low-cost carrier model are described such as cost control strategies, pricing approaches, and operational efficiencies. Specific Indian low-cost carriers IndiGo and SpiceJet are profiled, outlining their business strategies and approaches to achieving low costs and good customer service.
Airfares Global Distribution Strategy for Higher Incremental Revenues in Non-...Simon Riha, MSc, MBA
This paper was written for the 2nd International Aviation Management Conference 2014 organized by the Emirates Aviation University in Dubai, UAE. It elaborates an often ignored commercial potential of non-core and distant countries. It is shown that airlines can seek incremental revenues in off-line markets utilizing their current distribution channels at minimum investment. Yet the airlines often miss these opportunities by not having set their fares accordingly. The study, supported by sound literature review, analyzes these points of issue, proposes an airfare global distribution strategy for higher incremental revenues from non-core and distant countries and provides recommendations for implementing this strategy.
Southwest Airlines was expecting delivery of two new planes and needed to decide how to operate them while preserving their unique culture. Southwest pioneered the low-cost carrier model with low fares, high frequency flights, and a focus on customer service. They prioritized hiring for attitude over skills and emphasized teamwork and employee ownership to build a fun and casual culture. The case discusses how Southwest could expand strategically while maintaining their low-cost advantages and culture.
Marketing Excellence Southwest Airlines
Southwest Airlines debuted in 1971 with little money but lots of personality. Marketing itself as the LUV airline, the company featured a bright red heart logo and relied on outrageous antics to generate word of mouth and new business. Flight attendants in red-orange hot pants served Love Bites (peanuts) and Love Potions (drinks). Today, it is Fortune’s seventh-most admired company in the world.
How did a small-budget airline accomplish so much? Southwest’s business model is based on streamlining its operations, which results in low fares and satisfied, loyal consumers. The company uses a point-to-point routing system, flying thousands of shuttle trips between different pairs of airports or “points” and carrying more passengers per plane than any other airline. Each aircraft averages 6.25 flights a day, flying for almost 12 hours. Southwest can accomplish such a feat because it avoids the traditional hub-and-spoke system and has extremely fast turnaround. In its early years, it turned planes around in less than 10 minutes. Today it averages 30 minutes—half the industry average.
Southwest’s unique boarding process also helps expedite departure. Instead of getting assigned seating, passengers are put in one of three groups (A, B, C) and given a number when they check in. Group A boards first and in numerical order (for example, A1–A30). Once on board, passengers may sit anywhere they like.
Southwest also saves by flying only Boeing 737-700s and 737-800s. This simplifies the training process for pilots, flight attendants, and mechanics and lets management substitute aircraft, reschedule flight crews, and transfer mechanics quickly and effortlessly.
One of Southwest’s biggest cost savings techniques is its strategy of purchasing fuel options years in advance. Jet fuel is an airline’s largest expense and now accounts for 35 percent of operating costs versus 13 percent just a little more than a decade ago. Many of Southwest’s long-term contracts allowed the airline to purchase fuel at $51 per barrel, a significant savings especially during the 1990s and 2000s when oil spiked past $100 per barrel. Analysts estimate it has saved more than $2 billion this way.
Southwest also improves its fuel efficiency by making its planes lighter. Crew members power-wash the jet engines each night to remove dirt, planes carry less water in bathrooms, and seats have been replaced with lighter models. Because the airline consumes approximately 1.5 billion gallons of jet fuel each year, every minor change adds up.
Southwest has expanded by entering new markets other airlines overprice and underserve. These usually include secondary cities with smaller airports, whose lower gate fees and reduced congestion promote faster turnaround and lower fares. The company believes it can reduce fares by one-third to one-half whenever it enters a new market, and it expands every market it serves by making flying affordable for more people. S.
Marketing Excellence Southwest Airlines
Southwest Airlines debuted in 1971 with little money but lots of personality. Marketing itself as the LUV airline, the company featured a bright red heart logo and relied on outrageous antics to generate word of mouth and new business. Flight attendants in red-orange hot pants served Love Bites (peanuts) and Love Potions (drinks). Today, it is Fortune’s seventh-most admired company in the world.
How did a small-budget airline accomplish so much? Southwest’s business model is based on streamlining its operations, which results in low fares and satisfied, loyal consumers. The company uses a point-to-point routing system, flying thousands of shuttle trips between different pairs of airports or “points” and carrying more passengers per plane than any other airline. Each aircraft averages 6.25 flights a day, flying for almost 12 hours. Southwest can accomplish such a feat because it avoids the traditional hub-and-spoke system and has extremely fast turnaround. In its early years, it turned planes around in less than 10 minutes. Today it averages 30 minutes—half the industry average.
Southwest’s unique boarding process also helps expedite departure. Instead of getting assigned seating, passengers are put in one of three groups (A, B, C) and given a number when they check in. Group A boards first and in numerical order (for example, A1–A30). Once on board, passengers may sit anywhere they like.
Southwest also saves by flying only Boeing 737-700s and 737-800s. This simplifies the training process for pilots, flight attendants, and mechanics and lets management substitute aircraft, reschedule flight crews, and transfer mechanics quickly and effortlessly.
One of Southwest’s biggest cost savings techniques is its strategy of purchasing fuel options years in advance. Jet fuel is an airline’s largest expense and now accounts for 35 percent of operating costs versus 13 percent just a little more than a decade ago. Many of Southwest’s long-term contracts allowed the airline to purchase fuel at $51 per barrel, a significant savings especially during the 1990s and 2000s when oil spiked past $100 per barrel. Analysts estimate it has saved more than $2 billion this way.
Southwest also improves its fuel efficiency by making its planes lighter. Crew members power-wash the jet engines each night to remove dirt, planes carry less water in bathrooms, and seats have been replaced with lighter models. Because the airline consumes approximately 1.5 billion gallons of jet fuel each year, every minor change adds up.
Southwest has expanded by entering new markets other airlines overprice and underserve. These usually include secondary cities with smaller airports, whose lower gate fees and reduced congestion promote faster turnaround and lower fares. The company believes it can reduce fares by one-third to one-half whenever it enters a new market, and it expands every market it serves by making flying affordable for more people. S.
This book examines how Southwest Airlines, the largest carrier of passengers in the largest market in the world has become the envy of financial performance, customer, and employee satisfaction for the airline industry. For those of us who are involved in Organization Development or Human Resources and toil under the belief that people make a bottom line difference, this is our book. For leaders this is also your book, the lessons learned at Southwest are transferable not only to the airline industry but to any industry. A word of caution, the book is based on an academic/statistical study of the airline industry and reported more as an academic treatise than a captivating book. Don't let the style of writing get in the way of the important message:
Southwest's most powerful organizational competency--the "secret ingredient" that makes it so distinctive--is its ability to build and sustained high performance relationships among managers, employees, unions, and suppliers. These relationships are characterized by shared goals, shared knowledge, and mutual respect.
Over time Southwest Airlines has developed 10 organizational practices to facilitate coordination among 12 distinct functions: pilots, flights attendants, gate agents, ticketing agents, operations agents, ramp agents, baggage transfer agents, cargo agents, mechanics, fuelers, aircraft cleaners, and caters by building relationships of shared goals, shared knowledge, and mutual respect. The heart of this book is the description of these 10 practices and how managers in any setting can implement them to improve their business performance.
This document provides an overview and marketing plan for SeaPort Airlines. SeaPort provides air service to small, rural cities from larger hubs across several states. The plan aims to increase passenger numbers by 20% through building brand awareness. SeaPort offers a faster alternative to long drives, with comfortable, non-crowded planes. The plan seeks to address customer needs like avoiding high fares through a frequent flyer program and providing a stress-free travel experience.
JetSmarter is a mobile app that offers private jet flights worldwide. It works with over 800 air carriers to provide private charter flights, shared charter flights, scheduled jet shuttles, and last-minute jet deals. JetSmarter has over 250 employees across multiple international offices and over 6,700 paying members. It aims to simplify private air travel and expand access to more routes and cities globally.
Rahul Bhatia and Rakesh Gangwal founded IndiGo Airlines in 2004, with its headquarters in Gurugram, India. It commenced flight operations in 2006 and has become the largest airline in India by market share as of July 2023. IndiGo operates 1,900 daily flights to 108 destinations using an efficient hub and spoke model centered around its main hub at Delhi International Airport. It focuses on keeping costs low through an all Airbus fleet, bulk aircraft orders, and quick turnarounds to provide affordable airfares.
The document analyzes competition in the US airline industry using Porter's Five Forces model. It determines that the industry is an oligopoly, with four major carriers (Delta, Southwest, United, American) dominating the market. Airlines compete on pricing, using dynamic pricing strategies like yield management to adjust prices based on demand, time of booking, and other factors. This allows airlines to practice forms of price discrimination. While competition is present, barriers to entry are high for new airlines due to industry regulations, scale requirements, and brand dominance of the major carriers.
1. Southwest focused on short-haul domestic flights rather than long international routes, targeting price-sensitive travelers. This niche strategy allowed them to succeed where other airlines failed.
2. They utilized a point-to-point route system rather than hub-and-spoke, cutting costs and passing savings to customers in the form of low fares.
3. Employee satisfaction and development were prioritized, with strategies to continuously assess skills, knowledge, tools, and organizational culture - supporting the goal of delivering excellent customer service.
Southwest Airlines has proven successful through strategic acquisitions and programs. After acquiring AirTran, Southwest expanded into new international routes. Programs like early boarding and two free checked bags increased customer satisfaction without hurting profits. Southwest's strengths include its large fleet and culture, while opportunities remain in emerging international markets. Always considering cost savings, Southwest has managed risks like fuel costs through hedging contracts.
College Application Essay Tips Study In Canada UnChristine Maffla
This document provides 5 steps for getting writing help from HelpWriting.net:
1. Create an account with a password and email.
2. Complete a 10-minute order form providing instructions, sources, and deadline.
3. Review bids from writers and choose one based on qualifications and reviews.
4. Review the completed paper and authorize payment if satisfied.
5. Request revisions until fully satisfied, with a refund option for plagiarized content.
School Essay Essay For Child L. Online assignment writing service.Christine Maffla
The document discusses Ted Lindsay, Gordie Howe, and Syd Abel who were known as the "Production Line" for the Detroit Red Wings in 1950 when they won the Stanley Cup, though Gordie Howe suffered a serious head injury during the playoffs that almost cost him his life. Red Kelly and Jack Stewart anchored the defense as the top blue liners, and Terry Sawchuk was called up when goalie Harry Lumley was injured in the 1950 Cup run. Prior to the 1950-51 season, Lumley was traded from the team.
How To Write An Essay Abstract Synonym. Online assignment writing service.Christine Maffla
This document provides instructions for completing a group project for an economics course on business forecasting. It explains that students should be divided into groups of 3-4 to analyze time series data and answer questions related to forecasting building approval rates. The report should include an executive summary, main report discussing the analysis and answers, issues with the results, and an appendix with the analysis commands. The project aims to provide forecasting advice to a client and should not exceed 12 pages in length.
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The document provides instructions for requesting writing assistance from the HelpWriting.net website. It outlines a 5-step process: 1) Create an account with a password and email; 2) Complete a 10-minute order form with instructions, sources, and deadline; 3) Review bids from writers and choose one; 4) Review the completed paper and authorize payment; 5) Request revisions until satisfied. It emphasizes that original, high-quality content is guaranteed or a full refund will be provided.
Everything You Need To Know About Buying Essay Online - Learn ESLChristine Maffla
The document discusses the Note 7 fiasco involving Samsung's Galaxy Note 7 smartphone. It describes how Samsung unveiled the Note 7 to much fanfare in August 2016 but that a few weeks after its release, reports emerged of the phones exploding while charging. Airlines and passengers were warned not to use the Note 7 on flights due to explosion risks. Consumer safety groups also warned the public to stop using the Note 7 and were working with Samsung to address the issue. The fiasco was a major problem for Samsung's reputation and consumer confidence in one of its flagship products.
How To Write A Essay Step By Step Middl. Online assignment writing service.Christine Maffla
The document discusses the health care industry, which consists of several industries that provide services to private and business consumers. It notes that in 1886, brothers Robert, James and Edward Johnson created a company that has since revolutionized the creation and production of healthcare products. However, no other details are provided about the Johnson brothers or their company.
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The document discusses the history of discovering exoplanets, including the first confirmed detection of terrestrial mass planets orbiting a pulsar in 1992, and the first confirmation of an exoplanet orbiting a main sequence star in 1995. Early speculations about the possibility of exoplanets date back to the 16th century philosopher Giordano Bruno, and the idea was also mentioned by Isaac Newton in the 18th century. Major milestones in exoplanet discovery included the first imaging of exoplanets directly by telescopes and indirect detection methods such as the transit method and radial velocity method.
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Here are the key aspects of grounded theory according to Glaser and Strauss:
- Grounded theory is a qualitative research method that uses a systematic set of procedures to develop an inductively derived grounded theory about a phenomenon.
- The researcher does not begin with a preconceived theory in mind but rather allows the conceptualization of theories to emerge from the data through a process of constant comparison between data collection and analysis.
- Data collection and analysis occur simultaneously in an iterative process where each informs and shapes the other. The researcher alternates between collecting data and analyzing it to develop theoretical categories.
- Through coding and analysis, concepts and categories are developed to construct a theory that is "grounded" in or derived from
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This document discusses Air Deccan, India's first low-cost airline. It acknowledges those who helped with the report and thanks the college for providing a diverse learning environment. The abstract notes that Air Deccan adopted a no-frills, low-cost business model and was able to grow rapidly but also faced operational issues as it expanded. Section 1 provides background on the growth of the Indian aviation industry and low-cost carriers in India, noting Air Deccan was the first such airline and aimed to offer low fares to stimulate demand.
This document provides an overview of low-cost or low-frill airlines. It discusses the history and development of the low-cost carrier model globally, including in North America, Europe, Australia/New Zealand, Asia, and India. Key aspects of the low-cost carrier model are described such as cost control strategies, pricing approaches, and operational efficiencies. Specific Indian low-cost carriers IndiGo and SpiceJet are profiled, outlining their business strategies and approaches to achieving low costs and good customer service.
Airfares Global Distribution Strategy for Higher Incremental Revenues in Non-...Simon Riha, MSc, MBA
This paper was written for the 2nd International Aviation Management Conference 2014 organized by the Emirates Aviation University in Dubai, UAE. It elaborates an often ignored commercial potential of non-core and distant countries. It is shown that airlines can seek incremental revenues in off-line markets utilizing their current distribution channels at minimum investment. Yet the airlines often miss these opportunities by not having set their fares accordingly. The study, supported by sound literature review, analyzes these points of issue, proposes an airfare global distribution strategy for higher incremental revenues from non-core and distant countries and provides recommendations for implementing this strategy.
Southwest Airlines was expecting delivery of two new planes and needed to decide how to operate them while preserving their unique culture. Southwest pioneered the low-cost carrier model with low fares, high frequency flights, and a focus on customer service. They prioritized hiring for attitude over skills and emphasized teamwork and employee ownership to build a fun and casual culture. The case discusses how Southwest could expand strategically while maintaining their low-cost advantages and culture.
Marketing Excellence Southwest Airlines
Southwest Airlines debuted in 1971 with little money but lots of personality. Marketing itself as the LUV airline, the company featured a bright red heart logo and relied on outrageous antics to generate word of mouth and new business. Flight attendants in red-orange hot pants served Love Bites (peanuts) and Love Potions (drinks). Today, it is Fortune’s seventh-most admired company in the world.
How did a small-budget airline accomplish so much? Southwest’s business model is based on streamlining its operations, which results in low fares and satisfied, loyal consumers. The company uses a point-to-point routing system, flying thousands of shuttle trips between different pairs of airports or “points” and carrying more passengers per plane than any other airline. Each aircraft averages 6.25 flights a day, flying for almost 12 hours. Southwest can accomplish such a feat because it avoids the traditional hub-and-spoke system and has extremely fast turnaround. In its early years, it turned planes around in less than 10 minutes. Today it averages 30 minutes—half the industry average.
Southwest’s unique boarding process also helps expedite departure. Instead of getting assigned seating, passengers are put in one of three groups (A, B, C) and given a number when they check in. Group A boards first and in numerical order (for example, A1–A30). Once on board, passengers may sit anywhere they like.
Southwest also saves by flying only Boeing 737-700s and 737-800s. This simplifies the training process for pilots, flight attendants, and mechanics and lets management substitute aircraft, reschedule flight crews, and transfer mechanics quickly and effortlessly.
One of Southwest’s biggest cost savings techniques is its strategy of purchasing fuel options years in advance. Jet fuel is an airline’s largest expense and now accounts for 35 percent of operating costs versus 13 percent just a little more than a decade ago. Many of Southwest’s long-term contracts allowed the airline to purchase fuel at $51 per barrel, a significant savings especially during the 1990s and 2000s when oil spiked past $100 per barrel. Analysts estimate it has saved more than $2 billion this way.
Southwest also improves its fuel efficiency by making its planes lighter. Crew members power-wash the jet engines each night to remove dirt, planes carry less water in bathrooms, and seats have been replaced with lighter models. Because the airline consumes approximately 1.5 billion gallons of jet fuel each year, every minor change adds up.
Southwest has expanded by entering new markets other airlines overprice and underserve. These usually include secondary cities with smaller airports, whose lower gate fees and reduced congestion promote faster turnaround and lower fares. The company believes it can reduce fares by one-third to one-half whenever it enters a new market, and it expands every market it serves by making flying affordable for more people. S.
Marketing Excellence Southwest Airlines
Southwest Airlines debuted in 1971 with little money but lots of personality. Marketing itself as the LUV airline, the company featured a bright red heart logo and relied on outrageous antics to generate word of mouth and new business. Flight attendants in red-orange hot pants served Love Bites (peanuts) and Love Potions (drinks). Today, it is Fortune’s seventh-most admired company in the world.
How did a small-budget airline accomplish so much? Southwest’s business model is based on streamlining its operations, which results in low fares and satisfied, loyal consumers. The company uses a point-to-point routing system, flying thousands of shuttle trips between different pairs of airports or “points” and carrying more passengers per plane than any other airline. Each aircraft averages 6.25 flights a day, flying for almost 12 hours. Southwest can accomplish such a feat because it avoids the traditional hub-and-spoke system and has extremely fast turnaround. In its early years, it turned planes around in less than 10 minutes. Today it averages 30 minutes—half the industry average.
Southwest’s unique boarding process also helps expedite departure. Instead of getting assigned seating, passengers are put in one of three groups (A, B, C) and given a number when they check in. Group A boards first and in numerical order (for example, A1–A30). Once on board, passengers may sit anywhere they like.
Southwest also saves by flying only Boeing 737-700s and 737-800s. This simplifies the training process for pilots, flight attendants, and mechanics and lets management substitute aircraft, reschedule flight crews, and transfer mechanics quickly and effortlessly.
One of Southwest’s biggest cost savings techniques is its strategy of purchasing fuel options years in advance. Jet fuel is an airline’s largest expense and now accounts for 35 percent of operating costs versus 13 percent just a little more than a decade ago. Many of Southwest’s long-term contracts allowed the airline to purchase fuel at $51 per barrel, a significant savings especially during the 1990s and 2000s when oil spiked past $100 per barrel. Analysts estimate it has saved more than $2 billion this way.
Southwest also improves its fuel efficiency by making its planes lighter. Crew members power-wash the jet engines each night to remove dirt, planes carry less water in bathrooms, and seats have been replaced with lighter models. Because the airline consumes approximately 1.5 billion gallons of jet fuel each year, every minor change adds up.
Southwest has expanded by entering new markets other airlines overprice and underserve. These usually include secondary cities with smaller airports, whose lower gate fees and reduced congestion promote faster turnaround and lower fares. The company believes it can reduce fares by one-third to one-half whenever it enters a new market, and it expands every market it serves by making flying affordable for more people. S.
This book examines how Southwest Airlines, the largest carrier of passengers in the largest market in the world has become the envy of financial performance, customer, and employee satisfaction for the airline industry. For those of us who are involved in Organization Development or Human Resources and toil under the belief that people make a bottom line difference, this is our book. For leaders this is also your book, the lessons learned at Southwest are transferable not only to the airline industry but to any industry. A word of caution, the book is based on an academic/statistical study of the airline industry and reported more as an academic treatise than a captivating book. Don't let the style of writing get in the way of the important message:
Southwest's most powerful organizational competency--the "secret ingredient" that makes it so distinctive--is its ability to build and sustained high performance relationships among managers, employees, unions, and suppliers. These relationships are characterized by shared goals, shared knowledge, and mutual respect.
Over time Southwest Airlines has developed 10 organizational practices to facilitate coordination among 12 distinct functions: pilots, flights attendants, gate agents, ticketing agents, operations agents, ramp agents, baggage transfer agents, cargo agents, mechanics, fuelers, aircraft cleaners, and caters by building relationships of shared goals, shared knowledge, and mutual respect. The heart of this book is the description of these 10 practices and how managers in any setting can implement them to improve their business performance.
This document provides an overview and marketing plan for SeaPort Airlines. SeaPort provides air service to small, rural cities from larger hubs across several states. The plan aims to increase passenger numbers by 20% through building brand awareness. SeaPort offers a faster alternative to long drives, with comfortable, non-crowded planes. The plan seeks to address customer needs like avoiding high fares through a frequent flyer program and providing a stress-free travel experience.
JetSmarter is a mobile app that offers private jet flights worldwide. It works with over 800 air carriers to provide private charter flights, shared charter flights, scheduled jet shuttles, and last-minute jet deals. JetSmarter has over 250 employees across multiple international offices and over 6,700 paying members. It aims to simplify private air travel and expand access to more routes and cities globally.
Rahul Bhatia and Rakesh Gangwal founded IndiGo Airlines in 2004, with its headquarters in Gurugram, India. It commenced flight operations in 2006 and has become the largest airline in India by market share as of July 2023. IndiGo operates 1,900 daily flights to 108 destinations using an efficient hub and spoke model centered around its main hub at Delhi International Airport. It focuses on keeping costs low through an all Airbus fleet, bulk aircraft orders, and quick turnarounds to provide affordable airfares.
The document analyzes competition in the US airline industry using Porter's Five Forces model. It determines that the industry is an oligopoly, with four major carriers (Delta, Southwest, United, American) dominating the market. Airlines compete on pricing, using dynamic pricing strategies like yield management to adjust prices based on demand, time of booking, and other factors. This allows airlines to practice forms of price discrimination. While competition is present, barriers to entry are high for new airlines due to industry regulations, scale requirements, and brand dominance of the major carriers.
1. Southwest focused on short-haul domestic flights rather than long international routes, targeting price-sensitive travelers. This niche strategy allowed them to succeed where other airlines failed.
2. They utilized a point-to-point route system rather than hub-and-spoke, cutting costs and passing savings to customers in the form of low fares.
3. Employee satisfaction and development were prioritized, with strategies to continuously assess skills, knowledge, tools, and organizational culture - supporting the goal of delivering excellent customer service.
Southwest Airlines has proven successful through strategic acquisitions and programs. After acquiring AirTran, Southwest expanded into new international routes. Programs like early boarding and two free checked bags increased customer satisfaction without hurting profits. Southwest's strengths include its large fleet and culture, while opportunities remain in emerging international markets. Always considering cost savings, Southwest has managed risks like fuel costs through hedging contracts.
Semelhante a All You Bought Is The Seat - A Case Study Of Spirit Airlines (14)
College Application Essay Tips Study In Canada UnChristine Maffla
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School Essay Essay For Child L. Online assignment writing service.Christine Maffla
The document discusses Ted Lindsay, Gordie Howe, and Syd Abel who were known as the "Production Line" for the Detroit Red Wings in 1950 when they won the Stanley Cup, though Gordie Howe suffered a serious head injury during the playoffs that almost cost him his life. Red Kelly and Jack Stewart anchored the defense as the top blue liners, and Terry Sawchuk was called up when goalie Harry Lumley was injured in the 1950 Cup run. Prior to the 1950-51 season, Lumley was traded from the team.
How To Write An Essay Abstract Synonym. Online assignment writing service.Christine Maffla
This document provides instructions for completing a group project for an economics course on business forecasting. It explains that students should be divided into groups of 3-4 to analyze time series data and answer questions related to forecasting building approval rates. The report should include an executive summary, main report discussing the analysis and answers, issues with the results, and an appendix with the analysis commands. The project aims to provide forecasting advice to a client and should not exceed 12 pages in length.
One Way That You Can Help Students Practice Their ParaChristine Maffla
The document provides instructions for requesting writing assistance from the HelpWriting.net website. It outlines a 5-step process: 1) Create an account with a password and email; 2) Complete a 10-minute order form with instructions, sources, and deadline; 3) Review bids from writers and choose one; 4) Review the completed paper and authorize payment; 5) Request revisions until satisfied. It emphasizes that original, high-quality content is guaranteed or a full refund will be provided.
Everything You Need To Know About Buying Essay Online - Learn ESLChristine Maffla
The document discusses the Note 7 fiasco involving Samsung's Galaxy Note 7 smartphone. It describes how Samsung unveiled the Note 7 to much fanfare in August 2016 but that a few weeks after its release, reports emerged of the phones exploding while charging. Airlines and passengers were warned not to use the Note 7 on flights due to explosion risks. Consumer safety groups also warned the public to stop using the Note 7 and were working with Samsung to address the issue. The fiasco was a major problem for Samsung's reputation and consumer confidence in one of its flagship products.
How To Write A Essay Step By Step Middl. Online assignment writing service.Christine Maffla
The document discusses the health care industry, which consists of several industries that provide services to private and business consumers. It notes that in 1886, brothers Robert, James and Edward Johnson created a company that has since revolutionized the creation and production of healthcare products. However, no other details are provided about the Johnson brothers or their company.
Number Paper - A4 Plain And Square - Printable TeachinChristine Maffla
The document discusses the history of discovering exoplanets, including the first confirmed detection of terrestrial mass planets orbiting a pulsar in 1992, and the first confirmation of an exoplanet orbiting a main sequence star in 1995. Early speculations about the possibility of exoplanets date back to the 16th century philosopher Giordano Bruno, and the idea was also mentioned by Isaac Newton in the 18th century. Major milestones in exoplanet discovery included the first imaging of exoplanets directly by telescopes and indirect detection methods such as the transit method and radial velocity method.
What Is A Plot In A Story Images And Photos FinderChristine Maffla
Here are the key aspects of grounded theory according to Glaser and Strauss:
- Grounded theory is a qualitative research method that uses a systematic set of procedures to develop an inductively derived grounded theory about a phenomenon.
- The researcher does not begin with a preconceived theory in mind but rather allows the conceptualization of theories to emerge from the data through a process of constant comparison between data collection and analysis.
- Data collection and analysis occur simultaneously in an iterative process where each informs and shapes the other. The researcher alternates between collecting data and analyzing it to develop theoretical categories.
- Through coding and analysis, concepts and categories are developed to construct a theory that is "grounded" in or derived from
The document discusses how class has become an integral part of societies. It divides societies based on factors like gender, education, occupation, and wealth. These dividing factors shape how individuals are perceived by their peers and form the basis of social classes. While the elements that determine one's class may seem arbitrary, class influences daily interactions and how people perceive each other, whether consciously or not.
Miss GiraffeS Class October Writing Crafts For KidsChristine Maffla
The document discusses the steps to request writing assistance from HelpWriting.net, including creating an account, completing an order form with instructions and deadline, and reviewing writer bids before choosing a writer and placing a deposit to start the assignment. It notes that customers can request revisions until satisfied with the high-quality original content and receive a refund if plagiarism is found.
College Application Essay Editing Ser. Online assignment writing service.Christine Maffla
The document provides instructions for using the HelpWriting.net service to have college application essays edited, including creating an account, submitting a request with instructions and materials, reviewing writer bids and choosing a writer, revising the edited essay if needed, and being able to request revisions to ensure satisfaction with the editing services. The process involves a bidding system for writers, deposit payment, and guarantee of original and high-quality work or a full refund.
The document discusses the Freudian concepts of the id, ego, and superego and how they are represented by characters in William Golding's novel Lord of the Flies. Sigmund Freud proposed that people are made up of an id (wanting immediate gratification), ego (feeding the id in socially acceptable ways), and superego (doing things for the greater good). In Lord of the Flies, Golding uses Jack to represent the id, always seeking what he wants without restraint. Ralph represents the ego, attempting to satisfy desires appropriately. Piggy embodies the superego, acting for the benefit of the group.
College Essay Descriptive Paragraph About A PersonChristine Maffla
This research paper examines two extinct species: the archaeopteryx and the dodo bird. The archaeopteryx, which lived around 150 million years ago, was considered the first bird or a transitional form between reptiles and birds. It had both feathered wings and claws, and was a carnivore that preyed on small animals. The dodo bird was a flightless bird that became extinct after humans arrived on its island habitat. The paper explores these two extinct species that no longer exist today.
1. The document provides instructions for creating an account on HelpWriting.net in order to request that a writer complete an assignment. It outlines registering with an email and password, completing an order form with instructions and deadline, and choosing a writer to complete the work.
2. After receiving a completed paper, the customer can request revisions if needed and pay the writer upon approval. HelpWriting.net offers refunds for plagiarized work.
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Why You Need A Ghostwriter And How To Be A GhostwritChristine Maffla
The document provides instructions for using the HelpWriting.net ghostwriting service, including how to create an account, submit a paper request by completing an order form, review bids from writers and choose one to complete the assignment, and authorize payment after receiving and approving the completed paper. The service allows for multiple revisions to ensure customer satisfaction and offers refunds for plagiarized work.
016 College Essay Organizer Example First Sentence PChristine Maffla
The document provides instructions for requesting writing assistance from the HelpWriting.net website in 5 steps:
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Free Writing Worksheets For 4Th Grade - Uirunisaza.Web.Christine Maffla
This document outlines the goals and objectives of a project called Enterprise Connect. The main goal is to revolutionize connections between employees in a company by improving how employees interact with each other. Key objectives include making managers more accessible to their teams and allowing easier collaboration across departments. The project aims to streamline communication and boost productivity through a new internal communication platform.
How To Write An Interview Paper Format. Online assignment writing service.Christine Maffla
The document discusses Shintoism and the Ise Grand Shrine in Japan. It explains that the Ise Grand Shrine is the most important Shinto shrine and is dedicated to Amaterasu, the sun goddess. Amaterasu is an important deity in Japanese mythology and art. The shrine represents her with three symbols - cocks, a mirror, and a raven.
Zaner-Bloser Handwriting Grade K Homeschool Bundle-StudenChristine Maffla
This study uses molecular dynamics simulations to examine how the orientation of Stone Thrower Wales defects impacts the mechanical properties of graphene. Different types of STW defects are introduced in linear and angular orientations along the zigzag and armchair directions of graphene. The results provide insights into how the mechanical properties of graphene, such as strength and flexibility, can be tailored by controlling the placement and structure of defects. Understanding these effects could inform applications of defect-engineered graphene in flexible electronics and nanodevices.
009 Essay Example How To Cite Poem In ThatsnotusChristine Maffla
The document discusses the role of the insula in language processing. It begins by defining the insula as a cortical region along the floor of the Sylvian fissure. Recent studies suggest the insula plays a role in complex articulation, syntactic encoding, apraxia of speech, word repetition, and production of complex consonant clusters, pseudowords, and non-native syllables. The evidence presented shows greater left anterior insula activation during tasks involving novel or complex speech sounds compared to overlearned sounds.
বাংলাদেশের অর্থনৈতিক সমীক্ষা ২০২৪ [Bangladesh Economic Review 2024 Bangla.pdf] কম্পিউটার , ট্যাব ও স্মার্ট ফোন ভার্সন সহ সম্পূর্ণ বাংলা ই-বুক বা pdf বই " সুচিপত্র ...বুকমার্ক মেনু 🔖 ও হাইপার লিংক মেনু 📝👆 যুক্ত ..
আমাদের সবার জন্য খুব খুব গুরুত্বপূর্ণ একটি বই ..বিসিএস, ব্যাংক, ইউনিভার্সিটি ভর্তি ও যে কোন প্রতিযোগিতা মূলক পরীক্ষার জন্য এর খুব ইম্পরট্যান্ট একটি বিষয় ...তাছাড়া বাংলাদেশের সাম্প্রতিক যে কোন ডাটা বা তথ্য এই বইতে পাবেন ...
তাই একজন নাগরিক হিসাবে এই তথ্য গুলো আপনার জানা প্রয়োজন ...।
বিসিএস ও ব্যাংক এর লিখিত পরীক্ষা ...+এছাড়া মাধ্যমিক ও উচ্চমাধ্যমিকের স্টুডেন্টদের জন্য অনেক কাজে আসবে ...
Leveraging Generative AI to Drive Nonprofit InnovationTechSoup
In this webinar, participants learned how to utilize Generative AI to streamline operations and elevate member engagement. Amazon Web Service experts provided a customer specific use cases and dived into low/no-code tools that are quick and easy to deploy through Amazon Web Service (AWS.)
ISO/IEC 27001, ISO/IEC 42001, and GDPR: Best Practices for Implementation and...PECB
Denis is a dynamic and results-driven Chief Information Officer (CIO) with a distinguished career spanning information systems analysis and technical project management. With a proven track record of spearheading the design and delivery of cutting-edge Information Management solutions, he has consistently elevated business operations, streamlined reporting functions, and maximized process efficiency.
Certified as an ISO/IEC 27001: Information Security Management Systems (ISMS) Lead Implementer, Data Protection Officer, and Cyber Risks Analyst, Denis brings a heightened focus on data security, privacy, and cyber resilience to every endeavor.
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Throughout his career, he has taken on multifaceted roles, from leading technical project management teams to owning solutions that drive operational excellence. His conscientious and proactive approach is unwavering, whether he is working independently or collaboratively within a team. His ability to connect with colleagues on a personal level underscores his commitment to fostering a harmonious and productive workplace environment.
Date: May 29, 2024
Tags: Information Security, ISO/IEC 27001, ISO/IEC 42001, Artificial Intelligence, GDPR
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Beyond Degrees - Empowering the Workforce in the Context of Skills-First.pptxEduSkills OECD
Iván Bornacelly, Policy Analyst at the OECD Centre for Skills, OECD, presents at the webinar 'Tackling job market gaps with a skills-first approach' on 12 June 2024
How to Make a Field Mandatory in Odoo 17Celine George
In Odoo, making a field required can be done through both Python code and XML views. When you set the required attribute to True in Python code, it makes the field required across all views where it's used. Conversely, when you set the required attribute in XML views, it makes the field required only in the context of that particular view.
All You Bought Is The Seat - A Case Study Of Spirit Airlines
1. Running head: ALL YOU BOUGHT IS THE SEAT 1
ALL YOU BOUGHT IS THE SEAT
… and the Space Beneath the Seat, For Now
Benjamin Chong
MGMT 642 Air Carrier, Passenger and Cargo Management
Dr. Gerald Cook
Embry-Riddle Aeronautical University – Worldwide, Singapore Campus
July 2013
2. ALL YOU BOUGHT IS THE SEAT 2
All You Bought is the Seat … and the Space Beneath the Seat, For Now
Anyone who has flown with Spirit Airlines would understand the literal meaning of
the title and why it is so apt. Branding itself an Ultra Low Cost Carrier (ULCC), Spirit
epitomizes flying on the cheap, and is proud of it. Founded in 1964 as the Clippert Trucking
Company out of Michigan, it became Spirit Airlines in 1992, having undergone two name
changes and a stint as a charter tour operator along the way (Spirit, 2011). With the
appointment of Ben Baldanza as CEO in 2006, Spirit began its transformation into a ULCC
and in 2007, formalized it as a corporate philosophy with new branding and colors.
• Caliente Red – Low fares;
• Environmental Green – On-time and reliable;
• Sunshine Yellow – Clean new planes and
• Ocean Blue – Friendly staff.
These form the backdrop to its approach of offering ultra-low base fares to millions of
customers in the North, Central and South Americas and the Caribbean.
Fleet and Network
Spirit currently operates a fleet of 51 Airbuses (as of end-July 2013), comprising 29
A319s (145 seats), 20 A320s (178 seats) and 2 A321s (218 seats). Future deliveries of A320s
(including A320neos from 2015) and A321s would take its fleet to 79 total aircraft (Spirit,
2013), supporting annual growth of 18-22% through 2015 (CAPA, 2013).
With its corporate headquarters in Miramar, Florida and main base at Fort
Lauderdale-Hollywood, Spirit’s network encompasses 55 cities (as of end-July 2013) and
includes crew bases at Las Vegas, Detroit and Atlantic City (Velotta, 2012). While the
company eschews hub-and-spoke operations and avoids the word “hubs”, an examination of
the airline’s route map would reveal that Dallas/Fort Worth and Chicago/O’Hare are well-
served with a significant number of flight segments radiating from them (Spirit, 2013).
3. ALL YOU BOUGHT IS THE SEAT 3
Spirit’s preference for point-to-point operations avoids hub-and-spoke inefficiencies and
costs and allows the airline to quickly redeploy assets if the route does not break even or
show signs of profitability within six months (average break-even period is 6.5 months). In
fact, its Dallas/Fort Worth-Houston and Philadelphia-Las Vegas services are scheduled to be
terminated in September 2013 and January 2014 respectively, approximately nine to twelve
months after launch (CAPA, 2013).
Fuelling Spirit’s foray into Mexico via Cancun, Los Cabos and Toluca from
Dallas/Fort Worth was the success story from Fort Lauderdale. Spirit’s main base was the
launch pad for its push into Central and South Americas and the Caribbean, and the company
believes it can achieve the same level of growth with Dallas/Fort Worth and Mexico. The
company’s lack of sentiment about its routes is famous. “We expect every route to make
money. Not half of them. Not 99%,” said CEO Baldanza in an interview (Yeo, 2012). As
such, travellers should not be surprised to find that a city served by Spirit a year ago has now
dropped off the radar.
Business Model
Spirit’s business model is obsessively simple and focuses on lowering the base fare of
air travel, while unbundling everything it possibly can from the travel experience – checked
and carry-on bags, food and drinks, boarding passes, etc. and charging for them as optional
extras, boosting ancillary revenue. The company believes that passengers should pay for only
what they use and not subsidize others’ use (disproportionate or otherwise) of resources. An
oft-touted example is checked luggage. Spirit contends that airlines that offer “free” checked
bags have already included their cost into the ticket and passengers are, in a sense, exhibiting
over-consumption of a perceived zero-cost item (Shampanier, Mazar & Ariely, 2007). Those
who have no checked bags are then over-paying for their ticket. In an ideal world, passengers
4. ALL YOU BOUGHT IS THE SEAT 4
would just pony up for fuel “and everything else is an option”, according to CEO Baldanza
(Karp, 2011).
Spirit uses the low base fares to stimulate demand in what they feel are under-served
markets, where price-conscious customers are priced out of air travel by the incumbent
carriers, whether legacy or budget. A minimum of 25% reduction in fares is Spirit’s target in
new markets (Ranson, 2012). In fact, they have done better than that, considering the country
as a whole. The average US domestic airfare in 4Q12 was $374 in non-inflation adjusted
dollars (Bureau of Transportation Statistics, 2013) while Spirit’s average ticket revenue was
$126.50 (comprising an average of $75.11 in ticket revenue and $51.39 in ancillary revenue
per passenger flight segment), one-third of the national average (Spirit, 2013). The low fares
stimulate demand, leading to traffic growth, which increases revenue, allowing Spirit to
lower fares and setting off a virtuous cycle, which the airline is exploiting.
Spirit targets the price-sensitive leisure travelers as well as those visiting friends and
relatives (VFR) – low-yield markets that were largely ignored by the legacy carriers as they
pursue the higher-yield corporate travelers. Its initial expansion into Latin America was
fuelled by this strategy and its latest push inland at the domestic US market is but a
continuation of its chase for the “low-hanging fruit in legacy carrier markets” (CAPA, 2013),
emboldened by consolidation domestically and convinced that opportunities abound.
Keeping Costs Low
Spirit’s low cost base allows it to pursue a low-fare market stimulation strategy. The
company aggressively contains costs and works hard at extracting the maximum productivity
out of its assets. Its aircraft utilization is 12.8 hours per day, which compares favorably with
the industry daily average of 10.5 hours (Spirit, 2013; Massachusetts Institute of Technology,
2013). Turnarounds as short as 30 minutes plus scheduling of red-eye flights contribute to the
5. ALL YOU BOUGHT IS THE SEAT 5
high utilization, although any delays would have repercussions down the schedule (Nicas,
2012).
Packing more seats into its aircraft also allows Spirit to reduce seat-mile costs. Its
planes carry 20-30% more passengers than its competitors’, which while making for an
uncomfortable flight, have kept unit costs low (Spirit, 2013). Further cost efficiencies are
derived from operating a single aircraft type comprising the A320-family models, reducing
maintenance, inventory and training costs, both for pilots as well as maintenance crew.
Spirit sells most of its tickets (64.2%) through its website (www.spirit.com), reducing
distribution costs. Bookings through its call center and airport counters account for a small
percentage (8.6%) while third-party channels such as travel agents (physical or online) and
global distribution systems (GDSs) make up the rest at 27.2% of sales (Spirit, 2013). The
company seeks to pass on all distribution-related costs to the customer, which has the effect
of driving traffic to its website, where distribution costs are the lowest. Customers without
Internet access or wishing to engage a travel agent would have no choice but to pay the
difference.
At the end of 2012, Spirit’s cost per available seat mile (CASM) was 5.93 cents,
excluding fuel – one of the lowest in the industry. But even it cannot escape the high fuel
prices and its fuel costs were 35.8% of revenue in 2012, about par for the course for airlines
(Spirit, 2013).
Increasing Revenue
Using price to influence consumer behavior is not new to Spirit. When it started
charging for all checked bags in March 2007, the airline discovered that passengers were
bringing more bags onboard as they sought to avoid fees. Passengers contend for space in the
overhead bins, because while the airline managed to squeeze more seats in its aircraft, the
amount of overhead bin space remained the same. Bags that could not fit had to be checked at
6. ALL YOU BOUGHT IS THE SEAT 6
the gate, creating delays that ripple through the schedule (McCartney, 2010). In a first for the
industry, Spirit began charging for carry-on bags in August 2010. Initial outrage within the
industry soon gave way to grudging admiration as passengers kicked up a fuss at first but
then adapted. Load factors are as high as ever, fewer bags are carried on board and the plane
turns around quicker. “Most of the charges for optional services, they act as economic
incentives for customers to behave in a way that would cost us less money,” said CEO
Baldanza (Yeo, 2012).
Apart from the space beneath your seat, everything else is chargeable. Even the
printing of boarding passes at the airport would cost you money. As the airline aggressively
and some would say, ruthlessly, stripped out non-essentials, it was embarking on “price
discovery” to find out what travelers value (Denning, 2012). And what travelers value is low
fares, in the market segment that Spirit is targeting. By charging for ancillaries, allowing the
company to simultaneously lower base fares, Spirit has managed to maintain an average 85%
load factor over the past two years. Despite being crowned America’s most-hated carrier in
the latest Consumer Reports rankings, Spirit has seen no let-up in its demand, as customers
consistently vote with their wallets, even as they moan about fees (Karp, 2013).
Competition
Spirit’s route network has 60% market overlap with American Airlines, but it would
be slightly inaccurate to term American as a competitor, at the moment, given that both
airlines target different segments of the market. Spirit’s operations into the Caribbean and
Latin America from Fort Lauderdale contend with American’s out of its Miami hub.
Likewise, JetBlue Airways has a presence in Fort Lauderdale and competes on those routes
as well (Spirit, 2013). Thus far, Spirit has managed to avoid market retaliation, as it is small
(approximately 1% national market share) and it is not taking customers away from the other
carriers (Nicas, 2012). What it is doing, is growing the market with its low fares, attracting
7. ALL YOU BOUGHT IS THE SEAT 7
price-conscious travelers who were previously priced out of the market, particularly in the
VFR segment in the Caribbean and Latin America.
Another airline with a similar model is Allegiant Air. Like Spirit, it targets the price-
sensitive leisure travelers and derives a large portion of its revenue from ancillary fees.
However, its network has very little overlap with Spirit and one of its business strategies is to
use fully depreciated old aircraft that are cheap to operate, despite fuel inefficiencies.
Nonetheless, Allegiant is eyeing the Mexican market and its expansion plans may bump up
against Spirit’s as both compete in same market segment (Nicas, 2013).
Profitability
Spirit has been consistently profitable since its emergence as a ULCC in 2007. Its
2012 net income of $108.5 million was 42.0% higher than the previous year’s. Its pre-tax
profit margins in 1Q13 was 13.4%, the second highest among U.S. airlines (first was
Allegiant with 18.5%) (Nicas, 2013). As noted earlier, the airline is not focused on market
share, but profitability. It institutes just enough flights to stimulate demand (typically two to
three flights daily) and would not enter a battle for dominance, unlike legacy carriers who
need frequencies and service to attract the high-yield corporate traveler. Such tactics are
anathema to Spirit’s model and it assiduously avoids them, in fact yanking non-performing
routes and redeploying assets at short notice.
Another key driver of Spirit’s profit is its ancillary revenue. Accounting for 40.6% of
total revenue in 2012, it grew 40.3% from the previous year to reach $535.6 million in 2012
(Spirit, 2013). Wolfe Research airline analyst Hunter Keay says, “We factor in our opinion of
an airline’s willingness to pursue new fees when we decide whether or not to recommend the
stock” (Karp, 2013).
Continued profitability in any business is dependent on delivering exactly what the
customer wants. As CEO Baldanza puts it, “We care about the thing that customers tell us
8. ALL YOU BOUGHT IS THE SEAT 8
they care the most about, and that’s offering the lowest possible fares. If you can do it
yourself, it’s free. If we have to do it, you’ll pay for it” (Mouawad, 2013).
Conclusion
Spirit’s success is due in no small part to its first-mover advantage in the ULCC
business. It was shrewd enough to identify a gap in the market and moved quickly to fill it.
Despite constant bad press (or free publicity, as the company would say) and reviews, there is
still significant demand for Spirit’s product. A best-ever second quarter showing of $45.8
million in adjusted net income in 2Q13 (a 29.6% gain year-on-year) attests to that (Spirit,
2013).
As it continues to expand, Spirit would face pressure to reduce its cost base further,
given its stated goal of a baseline 25% reduction in fares upon market entry. If network
carriers are successful in trimming their costs, Spirit has no choice but to get even more
creative in unbundling. Perhaps, a cleanliness charge would be next. As long as it is in line
with their business model and fares continue to drop (2Q13’s base fare fell 4.4% year-on-
year), passengers such as one Mr. Sech on one of Spirit’s Atlanta-Florida flights would
continue to fly. He summed it up nicely, saying, “I would never be loyal to this airline. But I
appreciate the model – as long as they don't ever charge to use the bathroom” (Spirit, 2013;
McCartney, 2010). Customers would move out of the target segment as their incomes grow,
but there would always be more passengers for whom the lowest fares beat everything else.
9. ALL YOU BOUGHT IS THE SEAT 9
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