The of Spirit Airlines - Case Study Example

Table of Contents Table of Contents 1 Introduction 2 SWOT of Spirit Airlines 3 Recommendations/ Conclusion 8 References 9 Bibliography 9 Introduction The company, Spirit Airlines was established by the name of Clippert Trucking Company in the year of 1964. Initially, the company operated as tour operator which organized charter tour programs for their customers. In the year of 1990, the company was granted the ‘Sir Carrier Certificate’ and it started air charter activities. The company was renamed as Spirit Airlines in the year 1992 and since then it started its passenger services. Spirit Airlines is based in Florida in the city of Fort Lauderdale. The company operates at an extremely low-cost implying that the airlines present travelling chances at quite reasonable prices. The flights operate chiefly from and to South Florida, Latin America along with the Caribbean. The airline focuses on capturing the market of people travelling by air with the low fares. They believe that this market of air travelers have always been served with high costs and their strategy of low air fares grant them the prospect of continuous growth. This prospect also facilitates their sustained existence in the industry. The company employs the model of ultra low-cost carrier (ULCC) in their business. This model of ULCC assists the company to make available their services at low-fares which entails the fundamental service. The company also offers an assortment of elective services that can be availed with the help of extra charges. The company generally targets the people who are leisure travelers with the help of their low-cost services. Their unique services and low air fares have earned them immense popularity in the US placing them among the best airline companies in the country in spite of the increase in the fuel prices (Edgar Online, 2011; Spirit Airlines, 2011). SWOT of Spirit Airlines The biggest strength that has placed the company among the best airlines companies is their low-cost design. The operating expenses of the company were stated to be one of the lowest amongst all the airlines companies functioning in the US. It is believed that this advantage of cost enables them to defend their position in the airlines industry and facilitates them to make available such low fares in the market, keep up the working margins and hold up the constant development and expansion. Although, the airlines had to increase their costs of tickets from the year 2009-2010 owing to the boost in the fuel prices but they still managed to keep up their revenue and be counted among the best airlines of the US. Their low operating expenses can be credited to be the key reason behind their low fares and also for their success (Edgar Online, 2011; Spirit Airlines, 2011). The airline is able to attain such low operating expenses due of their soaring and maximum exploitation of aircrafts. One of the most significant factors and strengths behind their success is perceived to be their workforce. The employees of the company are highly productive which facilitates in bringing down the operating expenses by a large extent. The company is known to contract out few of their operating activities that are considered to be feasible and advantageous. Another technical factor that facilitates in reducing their operating expenses is their Airbuses as they engage quite less maintenance expenses in comparison to the other ones. The airlines involve same set of employees across their flights as well as airbuses. This drives away the need for additional employees which further results in reducing the expenses for the company. The company does not engage huge expenses behind marketing, sales as well as distribution with the assistance of direct marketing. The company advertises and encourages sales with the help of their website which trims down a significant amount of expenses related to marketing. The timing of the operating flights is known to be planned quite efficiently which entails negligible ground timing among the different flights. The company has been successful to introduce and maintain a business related culture which is intensely emphasizes on bringing down the expenses of the company (Edgar Online, 2011; Spirit Airlines, 2011). The other strength is said to be their ability to innovate their pricing strategy. The company constantly keeps on making innovation in their plans of pricing in order to generate noteworthy non-ticket income. This assists them to kindle the requirement for their products among the travelers or passengers availing their services. This is attained with the assistance of their low fares which facilitates the travelers to recognize, choose and shell out monetary consideration in favor of the products as well as services which are wanted by them. Therefore, it is evident that the airlines not only generate revenue with the assistance of their fares for tickets but also with an array of other services that are offered by them. The company manages to generate such significant amount of non-ticket proceeds from each passenger in the form of baggage charges, also the passengers are made to pay in order to possess premium seats in the flight among other schemes (Edgar Online, 2011; Spirit Airlines, 2011). Their flexible business model as well as foundation of customers also acts to be the strength for the company. The company as mentioned is known to target the leisure travelers and so, does not depend highly on the premium-fare customers. The leisure travelers have been observed to prefer low fares whereas, the premium-customers would obviously engage a cost structure which is quite high. The company’s ability to offer low fares followed by a wide variety of services has been observed to appeal to the customers who are responsive to prices (Edgar Online, 2011; Spirit Airlines, 2011). Thus, it can be observed that the application of ULCC model of business has facilitated in producing steady financial results even at times of economic upheaval. Although a decrease in the revenue was stated due to the augmenting fuel prices but still the company managed to get back to its stable position by altering their efficient marketing strategy according to the need of the situation. Their structure of low fares, minimum operating expenses and the productive employees can be referred to be their core competencies that ensure their successful existence (Edgar Online, 2011; Spirit Airlines, 2011). The weakness of the company lies in their limited coverage of destinations. The airlines should plan to expand their flight operations to other countries and destinations. The company should also consider the market of premium customers and such travelers. The company prefers to target only the leisure travelers but in order to grow and develop it needs to take into consideration the business travelers as well. In order to sustain in the industry taking into concern the augmenting cost of fuel, it is important that the company expand its base of travelers. The company does not believe in spending resources for the purpose of marketing. This acts a grave point of weakness as in this competitive age marketing is seen to be the most significant support for survival. The company should design plans and strategies for advertising and promoting their brand in order to attract customers and travelers from all walks of life. The company engages its employees commonly in the flights as well as in its airbuses. There are chances that this might affect the quality of the service provided and so, the company should have employees separately dedicated for both the purposes so as to maintain the quality of the provided service (Edgar Online, 2011; Spirit Airlines, 2011). As already mentioned earlier that there are a handful of airline companies which offer such low fares, so Spirit Airlines should avail this opportunity in order to attract customers with their low fares. The airlines should develop separate cost plans in order to lure the premium travelers. The airlines should also focus on the business travelers and structure special programs for them. People are getting conscious regarding the air fares as a result of the economic crisis and this is the time when the company should avail the opportunity to attract customers from the various segments. This should be done by designing cost structures for customers from all segments and by effectively advertising these features. Therefore, the company needs to practice the mentioned strategies so as to make best use of the opportunities (Edgar Online, 2011; Spirit Airlines, 2011). Despite the success of the company, it still witnesses threats which question its survival. The escalating competition in the industry poses a great threat for the company. The business of airlines is highly volatile and responsive to seasonal fluctuations. Therefore, certain factors like economic crisis, terrorism, labor behaviors, fuel costs and other related factors affect the revenue of the industry heavily. The labor union also hampers the business of the industry to a large extent by opting for strikes for the smallest of issues. The maintenance costs involved with the airlines is quite high and increases with every passing year which results in bringing down the revenue (Edgar Online, 2011; Spirit Airlines, 2011). Recommendations/ Conclusion The above discussion clearly brings out the strong as well as the weak areas of Spirit Airlines. A proper evaluation has been made of the various factors and it has been inferred that the company needs to improve on a few areas so as to ensure sustained existence in the market. The company should diversify the aimed market by focusing on the business travelers as well as the premium travelers. In order to bring in the premium customers the company needs to develop certain fresh cost structures which should be kept high compared to the existing ones along with a few special services with it. The company should also expand its services to other countries and destinations in order to capture a large market and earn more revenues. The company also needs to adopt and design effective marketing as well as distribution strategies so as to reach out to a broad number of travelers. References Edgar Online, (2011). Spirit Airlines, Inc. Company Description. Retrieved Online on November 12, 2011 from http://pro.edgar-online.com/ipo.aspx?ColLeft=3c2bcac1-dbf5-4776-9d3b-89001baee8d5&ColRight=76baaeb6-2549-44f5-8e1d-cd700701e704&cikid=837419&tabIndex=2&coname=SPIRIT+AIRLINES%2C+INC.&fnid=65205&ColLeft=3c2bcac1-dbf5-4776-9d3b-89001baee8d5&ColRight=76baaeb6-2549-44f5-8e1d-cd700701e704&cikid=837419&tabIndex=2&coname=SPIRIT%20AIRLINES,%20INC.&fnid=65205 Spirit Airlines, (2011). About Us. About Spirit. Retrieved Online on November 12, 2011 from http://www.spirit.com/Default.aspx Bibliography Gross, S. & Schroder, A., (2007). Handbook Of Low Cost Airlines: Strategies, Business Processes And Market Environment. Erich Schmidt Verlag. Read More