Spirit Airlines discloses real consequences of poor customer service

by Tom Johansmeyer on

If you ever want the truth about anything, the smartest thing you can do is follow the money. Cash doesn’t lie, regardless of the people who are wielding it. So, if you don’t think airlines have any real risk because of poor customer service – that everyone just expects and lives with the worst – it pays to check out the recent Spirit Airlines financial filing.

Spirit is looking to go public with the hopes of raising $300 million. To do so, of course, it had to file all kinds of paperwork with the SEC, including a Form S-1, which includes, among other things, the risks the company faces. Think of it as a warning label for potential investors.

Based on the document, covered over on Elliott.org, service is enough of a risk that Spirit feels warrants mentioning:

Negative publicity regarding our customer service could have a material adverse effect on our business.

In the past we have experienced a relatively high number of customer complaints related to, among other things, our customer service, reservations and ticketing systems and baggage handling.

This isn’t just theory, here. Spirit is disclosing what it has actually experienced. It’s a touch of North Korean-style self-criticism that’s eye-opening for potential investors. It’s also a case of brutal honesty. Spirit is saying that it has had lots of complaints across virtually the entire company.

In particular, we generally experience a higher volume of complaints when we make changes to our unbundling policies, such as charging for baggage.

Okay, no shocks here.

In addition, in 2009, we entered into a consent order with the DOT in which we were assessed a civil penalty of $375,000, of which we are required to pay only $215,000 provided there are no further similar violations for one year after the date of the consent order, for our procedures for bumping passengers from oversold flights and our handling of lost or damaged baggage.

Not only does Spirit suggest that that there is a risk to future customer revenues, the airline also indicates that there are regulatory expenses associated with poor customer service.

Our reputation and business could be materially adversely affected if we fail to meet customers’ expectations with respect to customer service or if we are perceived by our customers to provide poor customer service.

Translation for investors = our service levels could cost you your money.

Spirit is in a tough spot, because it’s looking to enter the pubic capital markets – it isn’t there already, like the major characters. And, as they say, the first time can be uncomfortable and awkward.

Consumer Travel Alliance report finds major U.S. airlines not disclosing most fees on websites

by McLean Robbins on

A typical passenger traveling from Washington, D.C. to Orlando must check seven airline websites, visit 47 web pages and scan 11,000 words to find baggage fees alone, states a new report issued by The Consumer Travel Alliance, a non-profit organization promoting consumer interests on travel policy issues.

The CTA analysis tracked the time and effort it would take a typical two-bag traveler needing extra legroom to find and calculate the total cost of a flight from Washington, D.C. to Orlando, Florida. The analysis not a single one of the seven airline websites in the study offered a page or chart with specific fee information regarding extra legroom or seat upgrades. Although the airline sites disclosed baggage fees, those fees were often multiple clicks away from the main page and buried in diagrams and legal fine print.

“The airlines are asking travelers to put on a blindfold and hand over their wallets every time they buy a ticket,” said Charles Leocha, director of the Consumer Travel Alliance. “There is no way for a traveler to find the vast majority of extra fees charged by airlines on their websites, because those fees aren’t even listed. That’s why two-thirds of air travelers said in a recent survey that they had been surprised by hidden fees at the airport. If airlines want to charge ancillary fees, they should be required to disclose those fees through every distribution channel in which they sell their tickets.”

The analysis also refuted frequent airline claims that all of their ancillary fees are listed on their websites. For example, a spokesperson for the airline industry told Bloomberg on September 17th that “fee information is already available on carrier Web sites.” In another news story, the same spokesperson said that “airlines post their fees on their websites …” and went on to claim that “there’s nothing hidden about the fees by the US airliners that have fees.”Earlier this year, CTA released the results of a study showing that hidden fees charged by airlines on popular routes can increase the base cost of an airline ticket by an average of 54 percent for a typical traveler with two checked bags and extra legroom, or by an average of 26 percent for a comparable one-bag traveler. One of the routes examined in that earlier analysis was used as the basis for this current review.

Travelers concerned about the issue of hidden fees can visit MadAsHell, a joint effort of the Consumer Travel Alliance, Business Travel Coalition, and American Society of Travel Agents, to sign a petition urging the U.S. Department of Transportation (DOT) to take action to make those fees fully transparent.

The analysis examined a single traveler with two checked bags wishing to obtain extra legroom on a flight from Washington, D.C. to Orlando, Florida. Base prices for the analysis were drawn from a popular online travel site. The analysis recorded the time and steps required to enter those fees manually, visit each of the websites of the seven airlines flying that route, attempt to locate the fees for checked baggage and extra legroom, and then calculate the full price of each itinerary.

[Image via Flickr user Fly For Fun]

GadlingTV’s Travel Talk – Torontonian Exploration!

by Stephen Greenwood on

GadlingTV’s Travel Talk, episode 30 – Click above to watch video after the jump

For those of you that attended this year’s Toronto International Film Festival, you may already know just how cosmopolitan Canada’s largest city is. Upon arriving, it’s safe to say that we completely underestimated the fifth most populous municipality in North America, but quickly realized its vast cultural offerings upon exploration.

There’s more than meets the eye in Toronto, so watch as we shake off the Virgin America party from the night before and explore the exciting neighborhoods of the world’s ‘most diverse city’!

If you have any questions or comments about Travel Talk, you can email us at talk AT gadling DOT com.

Subscribe via iTunes:
[iTunes] Subscribe to the Show directly in iTunes (M4V).
[RSS M4V] Add the Travel Talk feed (M4V) to your RSS aggregator and have it delivered automatically.

Links
Check out Gadling’s own guide to budget travel in Toronto!
Visit the tallest free-standing structure in the Western Hemisphere! The CN Tower.
And whatever you do, don’t miss out on Kensington Market – full guide available here.

All images used under a Creative Commons license. All music used courtesy of Nonstop Music.

JetBlue in-flight internet access coming in 2012, worth the wait?

by Tom Johansmeyer on

JetBlue is going to offer in-flight internet access! This is exciting news, right? JetBlue is one of the more exciting airlines in the market right now, having figured out how to offer solid customer service without jacking up fares (a combination the major carriers believe is impossible to attain … despite the fact that JetBlue has done so). So, the airline is getting into the internet game, a space in which it has lagged many other carriers.

Unfortunately, JetBlue isn’t going to begin installing the equipment until the middle of 2012, as it needs to be checked out and approved by the FAA before the airline can put it into production, according to FlightGlobal. The slow start might actually work to JetBlue’s advantage.

Rather than implement the solutions already out on the market, JetBlue has selected a different type of internet access technology, which should translate to better internet service for its passengers – which pairs well with the high levels of customer service the airline already offers. Unlike existing internet access systems, which interact with the ground, the JetBlue system will hit satellites. JetBlue CEO Dave Barger explains to FlightGlobal:

“In just the three years since we launched BetaBlue, the first commercial aircraft with simple messaging capability, technology has advanced by generations. Rather than invest in current technology, designed to transmit broadcast video and audio, we elected to partner with ViaSat to create broadband functionality worthy of today’s interactive personal technology needs.”

Barger also says, “This system will be designed for the 21st century, not just for today’s personal connectivity needs, but with the bandwidth to expand to meet tomorrow’s needs as well.”

[Via Business Insider]

Airlines continued to cut jobs – 25 months in a row

by Tom Johansmeyer on

There’s a reason why airlines have positioned themselves for a solid performance in 2010: in addition to charging all those extra fees, they have been cutting positions (and thus expenses). In July alone, the industry in the United States trimmed 2.3 percent of its workforce relative to July 2009. That made 25 consecutive months of net job losses in the domestic airline sector.

According to the Department of Transportation‘s Bureau of Transportation Statistics, 378,100 people were employed full-time by the airline industry in the United States in July 2010, a decline of 8,700 from July 2009. Five of the six network carriers cut positions, with Delta adding headcount only because of its Northwest acquisition. Only two low-cost carries reported net cuts for this period (Southwest and AirTran).

According to the Associated Press, maintenance and ticket agent positions are getting hit most:

While the number of in-flight airline employees like pilots and flight attendants is regulated by the Federal Aviation Administration, the bulk of airline employees-maintenance crews, reservations and ticket agents-work on the ground and aren’t subject to federal minimums. Airlines are operating with less staff to save money, but they’re also outsourcing maintenance and other work to other countries where labor is cheaper.

[photo by aflcio via Flickr]