βIt's expensive to carry bags. You hire people to load the bags. You 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.β
Squeezed budget travelers are abandoning leisure flights
βBudget airlines historically appeal to customers with limited income. And in our research, we have seen travelers who earn up to a $150,000 a year saying they've cut back on their leisure travel. They are traveling less often. They are, in some cases, foregoing air travel.β
Legacy carriers copied Spirit with Basic Economy fares
βSo the legacy airlines, they look at Spirit and other budget airlines, and clearly, they're eating their lunch. They're charging lower ticket prices upfront, and that seems to be working. So Delta and American and United, they also start throwing creature comforts out the window for passengers not willing to pay for them. And this way, they could also charge a lower upfront ticket price and compete for budget travelers.β
βThey're elitist, and I will tell you why. That survey never asks customers about the price of their ticket. And since they don't ask about the price, it's absolute bunk. If you wanna 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?β
Spirit branded itself as the Dollar General of airlines
βWell, if we were a retailer, we would, you know, some maybe some high service airlines in the world would think of themselves as a Nordstroms or something. And maybe, I bet if you were gonna talk to the guys at JetBlue, they'd say maybe we're Target or maybe even trying to become a little better than Target. We're Dollar General. That's where we are. We're not even Walmart. Right? We're Dollar General, and we like being Dollar General because we save people lots of money.β
Stated preferences and revealed preferences often clash
βEconomists 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. 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.β
βI guarantee you they'll be back. They'll be back. Why are our flights all full? Because those people come back. They're getting mad because they have to, you know, get their credit card out or whatever and think that they're gonna get everything for free. Trust me, I I I know enough to know that people complain, they get off. I I remember faces. They come back on.β
Loyalty programs let big airlines crush smaller rivals
βLoyalty programs play a huge role in allowing airlines like Delta and American and United to leverage their network size in ways that have nothing to do with actually offering higher quality service. In many cases, it was not changing the total offering at all, but simply giving one customer priority over another.β