Spirit on the rise
When it came to timeliness, Spirit Airlines was last — dead last.
In October 2015, people flying on Spirit had a 22 percent chance of arriving late to their destinations, making it the worst-performing airline for on-time arrivals in the U.S. Travelers complained to the U.S. Department of Transportation about Spirit more than three times as much as any other airline.
Then, in January 2016, the company’s board changed up its leadership and gave the new regime a mandate: Get the planes to their destinations on time. Department heads gathered in a conference room at the company’s headquarters in Miramar and plotted a comeback. And come back they did: In October 2018, Spirit ranked No. 1 for on-time performance, according to the DOT; just 11 percent of passengers arrived late. Passengers still complained, but far less.
Some within the company wondered if it was possible to maintain the airline’s low fares — starting at around $30 one-way — and improve on-time performance.
“I don’t think there would be an airline executive in the building who would have told you that would ever happen,” said Ted Christie, 48, who took over as CEO of Spirit in January. “We proved to ourselves that we could do it.”
Chasing the problem
During its transformation to an ultra-low cost carrier starting in 2005, Spirit’s top priority was to keep its fares low. To do that, it cut costs by packing more seats on planes — 182 seats on a Spirit Airbus 320 compared to 150 on American — and remaining hub-free, meaning its planes don’t have to return to its home airport of Fort Lauderdale every day. It cost Spirit just over eight cents to fly each passenger one mile in 2018; it cost American twice as much. When Spirit went public in 2011, it chose “SAVE” as its stock ticker symbol, a nod to its cost-cutting character.
Spirit was a leader in creating a pay-for-service model that many airlines now follow by taking an ax to the traditional ticket price. Spirit travelers get a random seat and one personal item for a base fare, and everything else is extra: $2 to print your boarding pass at an airport kiosk ($10 if an airport agent prints it for you), up to $50 for a seat of your choice, $65 for a carry-on bag at the gate, and so on. About half of Spirit’s revenue comes from the add-ons.
Metrics like on-time performance and complaints from passengers were “irrelevant” to former CEO Ben Baldanza, known for his brash style and raunchy ad campaigns. Saving people money was the top priority. Getting them where they were going on time was not.
“We were moving feverishly through that piece of the company’s evolution, which was to take a traditional airline product, completely dismember it, and turn it into something else,” Christie said. “Let’s try to get our efficiency as high as we possibly can, fares as low as we possibly can, and that had side effects, and you learn from that.”
Baldanza left the company in January 2016 after 10 years at the helm, and Robert Fornaro, a former board member, stepped in. That’s when on-time and complaint metrics began to really matter. High-profile delays — including a 2010 shutdown due to a pilot strike and a 2013 incident due to a safety issue — hadn’t helped the company’s reputation.
“The board finally reached a point where they said we want to turn this thing into a high-quality business,” said Christie, then president and chief financial officer.
Inside that conference room in Miramar at the start of 2016, Fornaro and Christie asked leaders from the operations department to tell them where the airline could improve. Two operations issues immediately stood out.
Like other low-cost airlines, Spirit sticks with a few aircraft models to keep maintenance costs at a minimum. Spirit’s largest plane, the Airbus 321, has 228 seats and five flight attendants. When a Spirit Airbus 321 arrived at an airport, those five flight attendants would continue on to their next shifts on five different flights. This was done to optimize their working hours, but it had unintended consequences.
“You don’t have to be a genius to realize that if that airplane is late, five flights are now late,” said Christie.
And weather patterns caused planes on certain routes to arrive late consistently with nowhere to park because gate schedules didn’t allow for delays.
In a cost gamble, Spirit began scheduling flight attendants on arriving flights to continue onto the next plane together, thus limiting potential for delay to one additional flight. The company also added more cushion time between flights in areas with consistent delays.
“The theory that we put together was that we think we’re spending more to fix the problems when we’re breaking than we would spend if we would fix it up front,” Christie said. “Inherent in our low cost structure was chasing the problem and putting out fires.”
Change didn’t happen overnight. But starting in 2017, airline enthusiasts began to notice the difference. Scott McCartney of Wall Street Journal’s “Middle Seat” column ranked Spirit next to last in 2015, 2016, and 2017, but in 2017 noted “improved service.” In 2018, Spirit climbed to the No. 4 spot on McCartney’s list, only behind Delta, Alaska and Southwest. “It had the lowest rate of mishandled bags and nearly matched Delta’s rate of canceled flights,” McCartney wrote.
In January 2019, Christie took over from Fornaro as CEO and inherited a much better performing airline. More planes were arriving on time, complaints about the airline were down, fewer flights were canceled and fewer bags were mishandled. Stock prices have climbed, now trading nearly 50 percent higher than in 2016, although they remain below late 2014 levels when oil prices were lower. Analysts at both Deutsche Bank and Stifel noted Spirit’s significant operations improvements to investors in their most recent reports; Deutsche Bank rate the stock a “buy,” while Stifel rated it a “hold.”
Friday, Spirit’s shares closed at $60.12. The 52-week high was 65.35.
South Florida’s airline
Spirit Airlines moved from the Detroit area to Miramar in 1999, just before it began the shift to ultra-low cost carrier. Now Spirit is the second-largest airline at Fort Lauderdale-Hollywood International Airport and employs about 3,500 people in South Florida. Some of those employees have noticed workplace improvements as on-time performance has improved.
Christopher Willis, 44, has worked as a ramp agent for Spirit at Fort Lauderdale airport for five years and is a union chairman for the International Association of Machinists and Aerospace Workers. Ramp agents are in charge of guiding planes to the gate, putting rubber blocks around the wheels so they don’t move while the planes are gated, off-loading the bags, emptying the waste from the plane’s bathrooms, and getting the planes back out to the runway in 45 to 60 minutes.
Since the start of 2018, Willis has seen Spirit invest in training for ramp agents, something he said was desperately needed; previously, agents got only two weeks of training before hitting the ramp. Willis said that in the past, the company had little follow-up with new agents, who would often make mistakes that caused delays. Now agents get a 10-day retraining and are involved in recruiting and interviewing new candidates.
“People mess up when they don’t know,” said Willis. “When you have a hiccup on that ramp, it really stops the whole operation on that gate. Every minute counts down on that ramp. Now we’re getting better candidates, better-trained people. We’re not making the same mistakes.”
Other employees say they still don’t have what they need to do the job well. A 51-year-old cabin cleaner for Eulen America, who did not want her name included in this story for fear of retribution, has been cleaning Spirit planes at Fort Lauderdale airport for six years. Spirit and other airlines contract out cabin-cleaning services to Eulen. She said she has to bring her own cleaning supplies from home because the supplies Eulen provides are not strong enough to clean the plane bathrooms, and she often has to reuse latex gloves. Because of Spirit’s tight turn-around window between flights, cabin cleaners have under 10 minutes to clean a plane, which often involves scrubbing bodily fluids off of seats, she said.
Both the cabin cleaner and Willis said they would like to see the minimum wage for all airline workers raised to $15 an hour. The Broward County Commission recently voted to raise the living wage for airport subcontractors, like cabin cleaners, from $12.38 to $13.27 an hour and will vote on raising the amount employers have to pay toward employee health insurance from $1.63 to $3.44 on Feb. 26. Direct airline employees are exempt from the living wage ordinance, so it does not apply to Willis. The starting hourly wage for ramp workers is currently $11.67, Willis said.
Miami-Dade, by comparison, mandates a living wage for airport workers at $13.23 an hour plus $3.17 for health insurance, which will go up to $3.45 next year. Airline employees are also exempt in Miami.
“All of us we have the same goals as they have,” said Willis. “We want to be No. 1, we want to be able to make sure the guests have a great experience when they get on that air craft no matter how much they pay for that ticket.”
The improved guest experience is not a fluke. In November 2018, Spirit ranked No. 2 for on-time performance, only behind Hawaiian Airlines. For January through November 2018, Spirit ranked No. 4 overall, a spot Christie is more than happy about.
This year, Christie wants Spirit to further improve guest experience by streamlining the check in process. Spirit is testing a self-bag drop at McCarran International Airport in Las Vegas and LaGuardia Airport in New York.
And no, it won’t cost you to drop your bag.
CEO: Ted Christie
Employees: 7,708 employees
Market capitalization: $4.108 billion