Episode 517: The Fastest Growing, Least Popular Airline In America : Planet Money It's cheap to fly on Spirit Airlines, but you have to pay extra for perks. And by perks, we mean a bottle of water or space in the overhead bin.
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Episode 517: The Fastest Growing, Least Popular Airline In America

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Episode 517: The Fastest Growing, Least Popular Airline In America

Episode 517: The Fastest Growing, Least Popular Airline In America

  • Download
  • <iframe src="https://www.npr.org/player/embed/276973956/277065949" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript

JACOB GOLDSTEIN, HOST:

Hey, just a quick note, this podcast is a rerun. It originally came out in 2014.

Good morning, Zoe.

ZOE CHACE, HOST:

Good morning, Jacob.

GOLDSTEIN: We're at LaGuardia Airport in New York. It's very early in the morning.

CHACE: Yes, it is.

GOLDSTEIN: And we are going to fly on Spirit Airlines to Ft. Lauderdale, Fla.

CHACE: And it cost us $68 to fly from here to Ft. Lauderdale.

GOLDSTEIN: Sixty-eight dollars and ninety-nine cents, but...

CHACE: But.

But, where to begin? There are so many buts. Everywhere you turn, there are fees.

GOLDSTEIN: Thirty bucks to pick our seats.

CHACE: If you want water on the plane, it costs $3.

GOLDSTEIN: And then, you've got the bag fee.

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED WOMAN #1: Well, you're allowed one personal item. You can't have two.

GOLDSTEIN: So if I have just the messenger bag and the backpack...

UNIDENTIFIED WOMAN #1: That's going to be $50.

CHACE: It's 50 bucks?

GOLDSTEIN: To carry on. Now, what if I check it?

UNIDENTIFIED WOMAN #1: Forty-five.

CHACE: Spirit Airlines is a subway car in the sky. There are ads on the overhead bins. I've never seen that before.

GOLDSTEIN: There are also more seats on the plane, which means they're closer together. There's less legroom.

CHACE: How are your knees?

GOLDSTEIN: I mean, they definitely reach the seat in front of me. If...

CHACE: I feel like you are perfectly sized for this situation.

GOLDSTEIN: If the guy in front of me were to put his seat back, I'd be screwed. The good news is on Spirit Airlines, you cannot put your seat back.

CHACE: (Laughter).

Chris Petrizzio, across the aisle from us, leans over and whispers into my ear, this sucks. Tell me...

CHRIS PETRIZZIO: (Laughter) I had to ask them if they charge to go to the bathroom. They charge for coffee. This is the first time we have used Spirit. And it's going to be the last time we use Spirit.

CHACE: And lots of people feel this way about Spirit Airlines.

UNIDENTIFIED MAN #1: Nothing was free - no water, nothing.

UNIDENTIFIED WOMAN #2: Peanuts. I've never flown an airline - even when you were up in the air for one hour - where you didn't get a cookie, a cracker and a cup of ice water.

UNIDENTIFIED MAN #3: It's a mess. They charge for everything. And it's a total zoo in the terminal. And everybody's scrambling. And no one's nice.

GOLDSTEIN: But our plane is basically full of people. And across the country, Spirit is adding planes. They're adding new routes. In fact, Spirit is the fastest-growing airline in America. Hello, and welcome to Planet Money. I'm Jacob Goldstein.

CHACE: And I'm Zoe Chace. Today on the show, the economic wisdom of one of the most hated airlines in America.

GOLDSTEIN: And a man who wants to convince you to love that airline.

(SOUNDBITE OF SONG, "I WANT YOU TO WANT ME")

LETTERS TO CLEO: (Singing) I want you to want me. I need you to need me...

CHACE: Spirit Airlines is a billion dollar company. But you wouldn't actually know that when you look at its headquarters. It's this generic office park, right. You open the door from the sidewalk. And there's just a dingy little room. There's no receptionist. The only thing there is a chair, a little table and a phone. You pick up the phone and you call whoever you're there to see. And we were there to see Ben Baldanza, the CEO of Spirit Airlines.

GOLDSTEIN: A lot of CEOs are boring interviews. They use a lot of jargon. They talk in a very bland way. Ben Baldanza is not like that.

BEN BALDANZA: Well, if we were a retailer, we would - you know, some - maybe some high-service airlines in the world would think of themselves as a Nordstrom or something. And maybe - I bet if you were going to talk to the guys at JetBlue, they'd say maybe we're a Target or maybe even trying to become a little better than Target. We're Dollar General. That's who we are. We're not even Wal-Mart. (Laughter). We're Dollar General. And we like being Dollar General because we save people lots of money.

GOLDSTEIN: You can see the Dollar General thing in Baldanza's office. It's an ordinary office on the ground floor. He's wearing a short-sleeved shirt. And there's some big windows, so he leaves the lights off to save money.

BALDANZA: I'll turn the lights on for you. Look. One bulb in those three goes on. That's the only thing that turns on when I turn the lights on in this office - one bulb in those three. There's no reason for me to waste that money.

CHACE: And to compare your company to the Dollar Store, that's kind of an unusual comparison for a CEO to make, especially in the airline industry. Airlines have always tried to sell themselves to us as the nicest, the most comfortable, the most legroom - like this ad from United, for instance.

(SOUNDBITE OF UNITED AIRLINES AD)

UNIDENTIFIED ACTOR: More room in Economy Plus, more comfort, more of what you need.

GOLDSTEIN: Ben Baldanza spent most of his career making that pitch.

BALDANZA: I spent over 20 years in what people think of as the traditional airline business. I worked for American, Northwest, Continental Airlines, US Airways, an airline down in Central America. And all those airlines were the same in the sense that their purpose in life was to try to attract a higher-fare customer. I would go to bed at night thinking, how can I get you to pay more for your ticket?

GOLDSTEIN: Baldanza's outlook changed not long after he got hired by Spirit back in 2005. Spirit used to be just one more mediocre, bargain airline in a crowd of mediocre, bargain airlines. Spirit was competing on price, yeah. But they were also trying to do the other stuff. And it - it wasn't really working.

CHACE: So in 2006, Ben Baldanza and Spirit Airlines made a decision. They were going to try to do in America what airlines like Ryanair and AirAsia were doing in other parts of the world. There were going to build an airline that just competed on price.

BALDANZA: Rather than an airline that was going to compete for our customers on any other basis, on any sort of physical product or experience or, you know, Zagat score or anything like that, right? It's going to cheap. So once you've made that decision, other decisions become a lot easier. So to keep our fares lower, we charge separately for checked bags and for large carry-on bags and to print your boarding pass with a human being and to eat your drink on board and to pick your specific seat assignment. We fly our planes more hours per day. We put more seats in every airplane. I mean, it's very easy to decide to put more seats on the airplane when you want to have a low price.

GOLDSTEIN: When you buy a ticket on most airlines, here's what you're paying for - a ride to wherever you're going and a few other things, a bottle of water, a Coke, space in the overhead bin if you want it. And you're paying for those things whether you use them or not.

CHACE: When you buy a ticket on Spirit, all you're paying for is the ride. That's part of the reason that Spirit is so cheap.

BALDANZA: There's an airline out there - and I'm sure you know their name - that spends a lot of money telling you that their bags are free. But their average tickets are $50 to $60 higher than ours. It's expensive to carry bags. You hire people to load the bags. You pay for bag belts in the airports and the rental space to do that. Every once in a while, you lose a bag or you break a bag, and so you have to have insurance to cover that. It is not free to carry bags. So you either charge the people who use it or you charge everybody, whether they use it or don't. And we think it's fairer to charge customers for what they use and not charge them for what they don't use.

GOLDSTEIN: So basically, the flight attendant coming down the aisle with the cart with water and soda and coffee - that is not like Spirit Airlines serving me as a valued customer. That's just, like, a little 7-Eleven rolling down the aisle.

BALDANZA: That's exactly right. Spirit serving you as a valued customer is letting you fly to New York for $69 when everybody else is charging 150 or letting you get to Nicaragua for $99 when everybody else is charging 250. That's Spirit serving you as a valued customer. In addition, we'll let this 7-Eleven be available to you while you're in the airplane. And if you want to buy, great. And if you don't, that's OK too.

GOLDSTEIN: I think Spirit is the first place where I have seen ads inside the airplane. I saw an ad on the overhead bin for a casino and an ad on some of the tray tables, like, right in your face for booze.

BALDANZA: Yeah, and we have ads on our flight attendant aprons too. Isn't that great? Because people pay us to put that ad there. And your fare could be lower.

CHACE: Baldanza's case for Spirit Airlines makes sense, pay for what you use. Don't pay for what you don't use. And Spirit is really cheap.

GOLDSTEIN: But lots of people just expect an airline to be a certain way. And when they get on Spirit and find out they're basically on a flying bus, they don't like it. In fact, Spirit Airlines came in dead last on a survey Consumer Reports published last year.

Let me just start by reading - I'm sure you've read this. But I'm going to read from it. So this is a Consumer Reports - a big survey from last year, thousands of flyers. Consumer Reports says bottom-ranked Spirit Airlines received one of the lowest overall scores for any company we've ever rated. How does that square with the great story you've just told me?

BALDANZA: They're elitist. And I will tell you why. That survey never asked customers about the price of their ticket. And since they don't ask about the price, it's absolute bunk. If you want to tell me that an airline that has more legroom and serves you more on board and has nicer lighting on the airplane is a better airline than ours but forget to say they charge $400 and we charge $99 - why doesn't Consumer Reports put out a survey saying that a Mercedes S-Class is better than a Ford Focus? It's true. Why don't they put out that survey? The Mercedes S-Class is better than a Ford Focus. So why isn't everybody buying Mercedes S-Classes?

GOLDSTEIN: I got one more line on Consumer Reports.

BALDANZA: OK.

GOLDSTEIN: Also the survey has a thing that's just called the reader score. This score is not, check these boxes. It's just, how do you feel about this airline? Do you feel good, or do you feel bad? And Spirit the worst on that one, too.

BALDANZA: Here's the reality. If you go into the Dollar Store and you're expecting to buy a nice three-piece suit, you're going to be really disappointed. No one should come to Spirit and complain we don't have leg room. We're not a store that sells legroom. We don't want anybody to be surprised that we charge for water onboard or that we charge for large carry-ons and things like that. We don't want to be - anyone to be surprised that - but some people still are. And that's a - and that's a failure of our company when they don't understand that reality.

GOLDSTEIN: On our trip, we talked to a lot of people who did not understand that reality. They seemed surprised and angry, and they said they were never going to fly Spirit again.

CHACE: And also we talked to some people who were totally onboard with Spirit's program. Yes, it sucks that the seats don't recline and you have to pay to use the overhead bin, but it's cheap. And I planned ahead, and I'm happy with this trade-off.

GOLDSTEIN: So clearly there are those two kinds of Spirit customers, but I wondered, is there a third kind?

So is it possible that there are people who know what they're getting into, who fly Spirit but hate it like - ah, I want to get the deal, but, like, gah (ph), I know I hate getting, you know, nickel-and-dimed - three bucks for water, like, the conflicted Spirit flier? Are there people who are like - hate flying Spirit?

BALDANZA: I think there are people who absolutely are like that, and I've met some. In fact, I was at a meeting a little while ago, and the person leading the meeting looked around the table. There were about 10 people from the company. Then they said, have any of you flown Spirit? And one guy said, yes, I fly them all the time. And she said, what do you think of them? He said, I hate them. And she said, well, why do you fly them? He said, well, they're so cheap.

(SOUNDBITE OF SPIRIT FLIGHT)

UNIDENTIFIED PILOT: Thanks for flying with us this evening.

CHACE: Back on our flight home, Barbara Dingus, our flight attendant, says she sees the hate-flyers all the time. They say they'll never fly Spirit again. But...

BARBARA DINGUS: I guarantee you they'll be back. Why are our flights all full? Because those people come back. They're getting mad 'cause they have to, you know, get their credit card out or whatever and think that they're going to get everything for free. Trust me, I've - I know enough to know that people have complained. They get off. I remember faces. They come back on.

GOLDSTEIN: Economists make this distinction between stated preferences and revealed preferences. Stated preferences are what people say they want, and then revealed preferences are what people actually choose when they go out and buy something.

CHACE: And Spirit hits both of those things. When you ask people on a poll or whatever what's most important to them when they pick an airline, they say above all else, a low fare. That's a stated preference. And then more and more people are actually going out and buying tickets on Spirit Airlines. That's the revealed preference. And yet, and yet, so many people just hate it.

GOLDSTEIN: Human desire is weird. Sometimes we don't want what we think we want.

CHACE: Or we do want it and then we kind of hate ourselves for wanting it.

GOLDSTEIN: We pick the cheap option, and then we feel kind of dirty about it. We say we'll never do it again, even though we know, deep down, we probably will.

(SOUNDBITE OF SONG, " I WANT YOU TO WANT ME")

LETTERS TO CLEO: (Singing) I want you to want me. I need you to need me.

GOLDSTEIN: As always, we want to hear from you. You can email us at NPR...

CHACE: (Laughter) Take two.

GOLDSTEIN: As always, we want to hear from you. You can email us at planetmoney@npr.org

CHACE: And you can find us on Facebook and Twitter.

GOLDSTEIN: You can also find us on the blog at npr.org/money. From Spirit Airlines Flight 710, somewhere between Fort Lauderdale and New York, I'm Jacob Goldstein.

CHACE: And I'm Zoe Chace. Thanks for listening.

(SOUNDBITE OF SONG, "I WANT YOU TO WANT ME")

LETTERS TO CLEO: (Singing) Feeling all alone with a friend, you know you feel like dying. Oh, didn't I, didn't I, didn't I see you crying?

GOLDSTEIN: One last thing. NPR wants your opinion. Let us know what you like, what you don't like about not just PLANET MONEY, but all of NPR's shows and podcasts. You can do it online at nprlistens.org.

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