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.

Continental pilot pension scam, nine disappointed pilots

by Tom Johansmeyer on

Continental Airlines is looking to cash in on pilots who cashed in on a divorce scam. The pilots used sham divorces to divert more than $10 million to their ex-spouses. Post-divorce, the exes cashed in on retirement benefits, and the fliers could stay in the sky – and keep earning.

It’s really pretty simple. A couple divorces. The pilot assigns all pension benefits to the ex-spouse. Then, the recipient goes to a state court and gets an order for a lump sum. After the divorce was final long enough for the money to start rolling in, these couples “reconciled.” Yep, they remarried once the scam was complete.

So far, eight of the nine pilots are gone (either by quitting or being fired). One was rehired, because he promised to repay the cash. Apparently, he didn’t do so fast enough and has been named as a defendant. The spouses are being pursued, as well. Seven of the alleged scammers are men, and two are women.

If you don’t want to believe that greed is responsible for the situation, you can call what these pilots did a Darwinian play to protect their cash. The average pilot on Continental is eligible for a lump sum of up to $900,000 upon retirement. But, some airlines are terminating their pension programs and turning them over to the Pension Benefit Guaranty Corp., which backstops pension plans up to an amount that’s not even close to $900,000. Faced with the prospect of losing their pensions, therefore some are turning to (alleged) fraud.

In addition to the nine who got nailed, other pilots have tried and failed.

Think that’s bad? Click the pictures to read about other women causing problems in the sky:


March airline plunge softens in April

by Tom Johansmeyer on

Passenger traffic is still falling. That’s not going to change for a while. But, the decline slowed in April, signaling that the prolonged sharp dips may be behind us. Some optimists even believe that the worst is over – though I maintain a healthy skepticism.

Note the metric being used: passenger traffic. There’s a lot of mileage between asses in seats and money in the bank. On a positive note, increased passenger traffic means that more people are spending money on travel. Of course, deep discounts are responsible in large part for the increasing traffic. The value of these passengers in dollar terms, therefore, is quite low.

United Airlines reported a traffic drop of 10.5 percent in April 2009 relative to the same month in 2008. Delta and American sustained smaller declines. Southwest, meanwhile, showed a 4.1 percent increase.

And, fares fell.

The average one-way domestic fare paid in the first quarter of 2008 was $213 – compared to $246 for full-year 2008.

For now, however, the airlines believe it’s better to sell seats at any price, especially if they have to put a plane in the air anyway.

Life Nomadic: How Much Does it Cost to Be a Nomad?

by Tynan on

One of the big barriers between most people and becoming a nomad is money. It sounds expensive. Most questions I get about it have to do with affording the trips.

Here’s the big secret: being a nomad is not expensive. In fact, without knowing how much money you spend monthly, I can confidently say that you can probably comfortably become a nomad and spend less.

I don’t have exact numbers, but I’d say that Todd and I each average spending under $3000 per month. That includes everything including lodging, airfare, food, entertainment, and small gear purchases along the way.

There’s a big difference between “cheaply” and traveling “cheaply and well”. I have little interest in eating ramen in a hostel or taking buses across the country.

That’s backpacking. Nothing wrong with that, but being a nomad is different.

The key is not treat it like a vacation. Many people spend money outrageously “because I’m on vacation”. Life Nomadic is a lifestyle that’s intended to be sustainable.

One big advantage the nomad has is that he has no expenses back home. The tourist is paying nightly for a hotel, but he’s also paying rent, electricity, and cable back home.

That’s like trying to pay for two lives at once.
A basic hotel in Tokyo will cost at least $150 per night. That’s not a great hotel, and it’s definitely not in a great location. $1050 for 7 days.

Renting a large room with a fridge, two beds, and a couch cost Todd and I $1000 for a month in the most desirable neighborhood of Tokyo. That’s cheaper than it would have cost us for a mediocre hotel for a week.

It’s almost always cheaper to rent an apartment for a month than to get a hotel, but you can also just choose cheap destinations. Thailand is full of great hotels for $20/night, either in downtown Bangkok or on the beach on an island. In Panama City you can get a solid (but not exceptional) hotel for around $30 a night.

If you really have a limited budget, go to any of the countless cheap-but-awesome destinations. You’d be shocked at how cheap great places in Southeast Asia are.

The savings you create by living in such cheap locales can easily pay for the plane tickets you need to get there.

If you really have NO money, go to Ko Phi Phi in Thailand. You can hand out flyers for the big reggae club for four hours a night and make enough cash to pay for all of your food and hotel forever. And that little island is paradise, believe me.

Every country you visit will have a whole tourism industry centered around creating an America-like experience for you at a premium price.

Avoid that. Live like the locals.

Take the train, walk, or buy a bike like the locals. Don’t take overpriced cabs. Buy food from the grocery store and cook for yourself in your rented apartment. Ask around and see which beach the locals go to. It’s usually much better than the one that tourists are whisked off to.

Spend time in nature. It’s usually free or cheap and some environments you’ll see are unlike anything back home. Even something as simple as the deserts of the Middle East are breathtaking to a foreigner.

If you’re going to be somewhere for a month, don’t feel like every day needs to be filled with sightseeing and adventure. Spend four days a week practicing your language, working, and walking around town like you would back home. Then on the weekends go white water rafting through the rain forest instead of seeing the latest disappointing movie.

Above all, don’t let money stop you from living the dream. Being a nomad can be as expensive or as cheap as you want it to be, and the sheer adventure of doing something almost guarantees that the money you spend on a monthly basis will be well worth it.

Ten top cities in the U.S. for making a living. Tourist spot in each

by Jamie Rhein on

There is a newly published Forbes.com article on the top 10 cities for making a living in the United States. Each has something to offer travelers as well. Here are the top cities and one place to go to in each. These are the first places that immediately came to mind. It’s an odd assortment.

1. Houston, Texas. I’ve been to the Holocaust Museum in Los Angeles and found it incredibly worthwhile and moving. From the description of the Holocaust Museum in Houston, it sounds similar, although there is a section that includes first person accounts of the Holocaust survivors who live in the city.

2. Minneapolis, Minnesota. As I’ve posted before, the outdoor art in Minneapolis is fantastic, particularly, the Minneapolis Sculpture Garden.

3. Boston, Massachusetts. The Freedom Trail that winds through the old part of Boston highlights the important places during the American Revolution. Here’s a tour that looks like a fun way to take it in. When I walked the Freedom Trail in Girl Scouts, we were on our own. I wish we had been on this tour.

4. Washington, D.C. For my next trip to D.C., I’d take Jeremy’s suggestion and head to the Brickskeller, a beer lover’s paradise. Sure, I’d take in the sites, many I’ve seen before, but Jeremy’s post offers something new.

5. New York City When I was sweltering in line in Central Park at the Delacorte Theater, not getting tickets to “Hair,” an experience that I recounted in a recent post, a Danish man and his daughter visiting NYC wanted recommendations on what to see. I suggested Ellis Island. The ferry trip there also swings by Liberty Island for a close look at the Statue of Liberty, and the Ellis Island Immigration Museum is superb.

6. Pittsburgh, Pennsylvania. I’ve only driven through this city, but have plans to visit the Andy Warhol Museum one fine day.

7. San Francisco, California. I must have a thing for taking boats to landmarks. I just love the tour of Alcatraz Island, that includes the famous prison that has been the backdrop for escape stories and intrigue.

8. Dallas, Texas. I went here to attend a cousin’s wedding and picked historic Dealey Plaza, the location of the grassy knoll and the Texas Book Depository, the scene of John F. Kennedy’s assassination, as my must-head-to-before-I-leave-town destination.

9. Milwaukee, Wisconsin. It’s not that I am overly fond of beer drinking, but the Miller Brewing Factory tour of is a lot of fun, particularly if there is a polka band involved.

10. Philadelphia, Pennsylvania. The Liberty Bell may be just a bell, but there’s something about that crack in it that makes for an icon to see if you can swing it.

To find out why these cities are top notch for making a living, read the article. One hint: It involves money.