Spirit Airlines Strategic Analysis and Recommendations

Based on internal and external assessment, this paper provides strategic recommendations for Spirit Airlines, Inc. Flying to more than 50 destinations in the Americas and with more than 100 aircrafts in its fleet, Spirit Airlines is one of the largest ultra-low cost airlines in the U.S. The paper is organized as follows. First, the two major issues or challenges facing the company are identified. Next, strategic options for addressing the issues are considered, clearly highlighting the advantages and disadvantages of each option. Based on the evaluation, recommendations for the two most viable options are presented. Finally, a brief plan for implementing the recommended options is provided.

 

 

Though Spirit Airlines enjoys a significant cost advantage, it grapples with poor customer satisfaction. Indeed, the airline has been ranked as the worst airline in the U.S. in terms of pleasing customers. Customer complaints against the airline stem from a wide variety of issues, including lack of catering services and in-flight entertainment, hidden charges, flight delays, flight cancellations, lack of seat selection, and unfriendly policies such as strictly non-refundable tickets. Complaints also arise from limited leg room, poor handling of luggage, excessive costs for luggage, and bumping of passengers. While Spirit Airlines predominantly focuses on getting travelers to their destination at the least cost possible, the airline's evident inattention to customer satisfaction continues being its major undoing in the rigorously competitive airline environment.

 

Spirit Airlines further faces competition, particularly from other low cost carriers. The largest low cost carrier in the U.S. is Southwest Airlines. Compared to Spirit Airlines, Southwest Airlines has a much larger fleet size and flies to more destinations. This means Southwest Airlines has a much larger customer base as well as greater revenue and profit potential. Other major rivals include Allegiant Air, JetBlue, Frontier Airlines, and Sun Country Airlines. Southwest Airlines and other low cost carriers in the U.S. have taken advantage of Spirit Airlines' inattention to customer satisfaction to gain a competitive advantage in the market. Without improving customer satisfaction, Spirit Airlines' market share could be taken over by other low cost carriers.

 

One of the strategies Spirit Airlines can use to improve customer satisfaction is differentiation. Generally, a firm may either pursue a low cost (cost leadership) strategy or a differentiation strategy. The former, like in the case of Spirit Airlines, involves providing products or services at a lower price than competitors (Srinivasan, 2014). A differentiation strategy, on the other hand, entails distinguishing one's offerings from the competition (Hill & Jones, 2012). While Spirit Airlines is inherently a low-cost airline, it can pursue differentiation at the same time. Given the airline's poor performance on customer satisfaction, it is evident that differentiation is not in its vocabulary. Firms choose to pursue cost leadership and differentiation so as to gain the advantages of both strategies.

 

The organization can also use a customer-oriented strategy. Closely related to differentiation, a customer-oriented strategy is basically a strategy where a firm prioritizes the customer in everything it does (Johnson, Scholes & Whittington, 2010). In other words, every process is geared towards creating value for the customer. Spirit Airlines operates with the assumption that the only thing low cost travelers want is a cheaper ticket. Though low cost travelers mainly care about reaching their destination with the least airfare possible, they also care about some comfort and a fair flight experience. With flight delays, a no-refund policy, separate charges for luggage, and lack of in-flight entertainment and catering services, just to mention a few, Spirit Airlines is evidently not a customer-oriented airline. The airline can offer cheaper fares while at the same time delivering a more pleasing flight experience for its customers.

 

The other challenge the airline faces is competition. One option for overcoming this challenge is market penetration. Market penetration is essentially about increasing market share (Hill & Jones, 2012). In other words, a firm expands its current offerings to its existing markets. Presently, Spirit Airlines commands a lower share of the market compared to Southwest Airlines and other low cost carriers. By appealing to customers within its target market, the airline would gain substantial competitive advantage. Market penetration can be achieved by, among other techniques, reducing prices, increasing promotional activity and distribution, and improving product attributes. For Spirit Airlines, increasing promotional activity, opening more locations, and refining offerings would be useful.

 

 

Spirit Airlines can pursue four strategic options to enhance its competitive advantage: differentiation, customer-oriented strategy, market penetration, and market development. Each option has its own merits and demerits. A differentiation strategy offers benefits such as improved brand reputation, increased customer satisfaction, and greater customer loyalty (Johnson, Scholes & Whittington, 2010). Nonetheless, a differentiation strategy can be readily imitated by competitors. Additionally, a differentiation strategy often involves substantial costs, especially due to the need to develop strong brand recognition.