Organizational Effectiveness Of Spirit Airlines
Airline Organizational Effectiveness
Spirit Airlines labels itself as an ultra-low cost airline that aims to offer cheap airfare for Americans. They believe their organization and business model are effective. But are they really as effective as they seem to be? Could they operate more effectively? An effective organization is one that one that can implement strategy in a manner that engages or satisfies its 3 major stake holders: consumers, employees, and shareholders. Although Spirit can be on thin ice at times with their employee relationships, by offering a low cost alternative for flying, Spirit is effective in satisfying the consumers’ needs and reaching its financial goals.
When discussing consumer satisfaction, it is important to first understand the nature of the corporate culture that dominates Spirit. Chief executive, Ben Baldanza, champions a philosophy of acting cheap. He says, the word cheap is not an insult. Mr. Baldanza actually vacuums his office and has a third of the light bulbs screwed in his office to save money. Demonstrating his frugality, he said “we don’t over-spend on that stuff.” This approach to dealing with …show more content…
money permeates throughout the entire airline. Spirit was the first airline to introduce fees for carry-ons and was one of the first to install chairs that do not adjust. A Spirit flyer has to even pay for water on a flight. However, their fares are incredibly affordable. “They are able to do so by putting a price tag on everything else (LA Times).”
According to Baldanza, purchasing a ticket for Spirit is purchasing a ticket of expectation. With such low fares, the chief executive believes it should be expected a flight with Spirit will likely not be enjoyable. But it will be the cheapest. It seems the company is positioned to satisfy the desire of consumers to save money, not necessarily wow them on an experience. This business model and philosophy has mixed reviews. The majority of people complain about the airline. The people looking for a good experience are let down. But they are only disappointed because they project the same expectation they have with other lines onto Spirit. If a king expects a gourmet meal in a peasant’s home, he will be disappointed. Likewise, the Spirit customers that are not upset are the ones that expect the quality of the flight to be poor. After all, the tickets are among the cheapest. One customer, Julia Gustafson, made a great point on January 29th 2014 on Airlinequality.com. “I think the key is to be educated and realize that this [flight] is a ‘pay for what you use [an] airline [for]’. We brought our own drinks and snacks on board and no one said a word! (Airlinequality.com)” When flying with the expectation that Spirit will be minimalistic in pleasuring the customer, the customer is much more satisfied. When a customer has a false set of expectations, the customer will complain. Spirit is effective, however, in saving money for its customers.
Employee engagement at Spirit Air is known to be extremely controversial. Lawsuits are routinely filed and employee fiascos are not uncommon. One situation in particular rippled throughout the media, a Pilot Strike in 2010. Pilots, associated with The Air Line Pilots Association (ALPA), walked out on strike, stranding thousands of passengers on June 12, 2010 (Flight Global). Spirit Airline Pilots felt they were tremendously unpaid; their salaries were among the lowest in the airline industry. This incident shed some light on what the culture of the company was with regards to employee satisfaction. It seems as though the transition for Spirit from regular airline to a leading ultra-low cost carrier developed a habit of cutting corners and decreasing costs in some important areas. Decreasing wages for the most important employees of the business, pilots, makes Spirit Air not only slightly controversial, but effective. Although this strike did occur in 2013, it is more than plausible there are more employees now within the firm that feel the same way as ALPA had, but deal with the issue less publicly.
It is evident many are unhappy within the firm after diving deeper into employee written reviews at Glassdoor.com and Indeed.com.
Most reviews are fairly balanced. The common remark is there are great people to work with but the pay is too low. Unfortunately, not much data on the turnover rates and retention rates is online. However, employee reviews offer individualistic experiences that provide great insight on how the average employee feels within the company. Nonetheless, in terms of employee satisfaction, providing an environment where employees feel served and part of the greater community of relatable people is essential for effectiveness. This company quality can retain employees. However, Spirit’s low wages deter the best within the airline industry. On the employee engagement front, Spirit Airlines is
ineffective.
According to Yahoo Finance and Standard and Poor’s financial data compilations, Spirit is in great financial health. Spirit’s stock price has increased from $11.48 in late May 2011 to $45.33 on February 6th 2014. In just two and a half years, Spirit’s stock price more than quadrupled. Comparing the first three quarters of 2012 and 2013, Spirit did well. Spirit earned $68.9 million more in Q1, $61 million more in Q2, and a whopping 114.3 million more in Q3, in 2013 compared to 2012’s quarters. Also Earnings per share reached just over 83 cents on the dollar in Q3 of 2013 (Standard and Poor’s). Their net income growth and, thereby, stock price has been increasing consistently since its IPO. So far, Spirit has been an incredible company to invest in. Initial public shareholders have not only made back there but earned an ROI of just under 300%. The sources of this growth are the ultra-low costs as well as the fees on the planes. Spirit fares, on average, are around 30% less than its competitors and an example of a Spirit fee is $4 for a bag of nuts (Wall Street Journal). On paper Spirit Airlines seems like it is extremely financially stable, in a high growth period, and definitely effective in its organizational and low cost strategy. Spirit has fulfilled its promise in satisfying its shareholders.
The effectiveness of Spirit Airlines has surprised many. Although its planes have almost no leg room and high convenience charges, its product price point is unbeatable. Spirit satisfies its customers solely on a financial level, but it is a significant one. Its employees are not the best paid in the industry and are not looked after with care like South West or Jet Blue, but Spirit’s financials are to be envied by other airlines. Spirit Airlines are extremely effective at this moment in time in satisfying shareholders and a bit less with its customers, but if Spirit decided to take a bit more care for its employees, it would not be a surprise if Spirit became a heavy weight within the airline industry.
Works Cited
Arnoult, Sandra. "Flightglobal.com." Shutdown Continues after Spirit Pilots Reject 29% Base Pay Increase. Flight Global, 14 June 2010. Web. 07 Feb. 2014. http://www.flightglobal.com/news/articles/shutdown-continues-after-spirit-pilots-reject- 29-base-pay-343253/
"Company Financials." Standard and Poor 's. N.p., n.d. Web. 07 Feb. 2014. http://www.netadvantage.standardandpoors.com.avoserv.library.fordham.edu/NASApp/N etAdvantage/cp/companyFinancials.do
Martín, Hugo. "Spirit Airlines Thrives in the Cheap Seats." Los Angeles Times. Los Angeles
Times, 02 Aug. 2013. Web. 05 Feb. 2014. http://articles.latimes.com/2013/aug/02/business/la-fi-spirit-airlines-20130804
Nicas, Jack. "A Stingy Spirit Lifts Airline 's Profit." The Wall Street Journal. Dow Jones &
Company, 12 May 2012. Web. 05 Feb. 2014. http://online.wsj.com/news/articles/SB10001424052702304749904577384383044911796 "SAVE: Summary for Spirit Airlines, Inc.- Yahoo! Finance." Yahoo! Finance. N.p., n.d. Web.
07 Feb. 2014. http://finance.yahoo.com/q?s=save&ql=
"Spirit Airlines." Indeed.com. N.p., n.d. Web. 07 Feb. 2014. http://www.indeed.com/cmp/Spirit-Airlines "Spirit Airlines Reviews." Glassdoor. N.p., n.d. Web. 05 Feb. 2014. http://www.glassdoor.com/Reviews/Spirit-Airlines-Reviews-E13683.htm "Spirit Airlines Customer Reviews and Spirit Airlines Passenger Trip Reports." Spirit Airlines Customer Reviews. N.p., n.d. Web. 05 Feb. 2014.
http://www.airlinequality.com/Forum/spirit.htm
Spirit Airlines labels itself as an ultra-low cost airline that aims to offer cheap airfare for Americans. They believe their organization and business model are effective. But are they really as effective as they seem to be? Could they operate more effectively? An effective organization is one that one that can implement strategy in a manner that engages or satisfies its 3 major stake holders: consumers, employees, and shareholders. Although Spirit can be on thin ice at times with their employee relationships, by offering a low cost alternative for flying, Spirit is effective in satisfying the consumers’ needs and reaching its financial goals.
When discussing consumer satisfaction, it is important to first understand the nature of the corporate culture that dominates Spirit. Chief executive, Ben Baldanza, champions a philosophy of acting cheap. He says, the word cheap is not an insult. Mr. Baldanza actually vacuums his office and has a third of the light bulbs screwed in his office to save money. Demonstrating his frugality, he said “we don’t over-spend on that stuff.” This approach to dealing with …show more content…
money permeates throughout the entire airline. Spirit was the first airline to introduce fees for carry-ons and was one of the first to install chairs that do not adjust. A Spirit flyer has to even pay for water on a flight. However, their fares are incredibly affordable. “They are able to do so by putting a price tag on everything else (LA Times).”
According to Baldanza, purchasing a ticket for Spirit is purchasing a ticket of expectation. With such low fares, the chief executive believes it should be expected a flight with Spirit will likely not be enjoyable. But it will be the cheapest. It seems the company is positioned to satisfy the desire of consumers to save money, not necessarily wow them on an experience. This business model and philosophy has mixed reviews. The majority of people complain about the airline. The people looking for a good experience are let down. But they are only disappointed because they project the same expectation they have with other lines onto Spirit. If a king expects a gourmet meal in a peasant’s home, he will be disappointed. Likewise, the Spirit customers that are not upset are the ones that expect the quality of the flight to be poor. After all, the tickets are among the cheapest. One customer, Julia Gustafson, made a great point on January 29th 2014 on Airlinequality.com. “I think the key is to be educated and realize that this [flight] is a ‘pay for what you use [an] airline [for]’. We brought our own drinks and snacks on board and no one said a word! (Airlinequality.com)” When flying with the expectation that Spirit will be minimalistic in pleasuring the customer, the customer is much more satisfied. When a customer has a false set of expectations, the customer will complain. Spirit is effective, however, in saving money for its customers.
Employee engagement at Spirit Air is known to be extremely controversial. Lawsuits are routinely filed and employee fiascos are not uncommon. One situation in particular rippled throughout the media, a Pilot Strike in 2010. Pilots, associated with The Air Line Pilots Association (ALPA), walked out on strike, stranding thousands of passengers on June 12, 2010 (Flight Global). Spirit Airline Pilots felt they were tremendously unpaid; their salaries were among the lowest in the airline industry. This incident shed some light on what the culture of the company was with regards to employee satisfaction. It seems as though the transition for Spirit from regular airline to a leading ultra-low cost carrier developed a habit of cutting corners and decreasing costs in some important areas. Decreasing wages for the most important employees of the business, pilots, makes Spirit Air not only slightly controversial, but effective. Although this strike did occur in 2013, it is more than plausible there are more employees now within the firm that feel the same way as ALPA had, but deal with the issue less publicly.
It is evident many are unhappy within the firm after diving deeper into employee written reviews at Glassdoor.com and Indeed.com.
Most reviews are fairly balanced. The common remark is there are great people to work with but the pay is too low. Unfortunately, not much data on the turnover rates and retention rates is online. However, employee reviews offer individualistic experiences that provide great insight on how the average employee feels within the company. Nonetheless, in terms of employee satisfaction, providing an environment where employees feel served and part of the greater community of relatable people is essential for effectiveness. This company quality can retain employees. However, Spirit’s low wages deter the best within the airline industry. On the employee engagement front, Spirit Airlines is
ineffective.
According to Yahoo Finance and Standard and Poor’s financial data compilations, Spirit is in great financial health. Spirit’s stock price has increased from $11.48 in late May 2011 to $45.33 on February 6th 2014. In just two and a half years, Spirit’s stock price more than quadrupled. Comparing the first three quarters of 2012 and 2013, Spirit did well. Spirit earned $68.9 million more in Q1, $61 million more in Q2, and a whopping 114.3 million more in Q3, in 2013 compared to 2012’s quarters. Also Earnings per share reached just over 83 cents on the dollar in Q3 of 2013 (Standard and Poor’s). Their net income growth and, thereby, stock price has been increasing consistently since its IPO. So far, Spirit has been an incredible company to invest in. Initial public shareholders have not only made back there but earned an ROI of just under 300%. The sources of this growth are the ultra-low costs as well as the fees on the planes. Spirit fares, on average, are around 30% less than its competitors and an example of a Spirit fee is $4 for a bag of nuts (Wall Street Journal). On paper Spirit Airlines seems like it is extremely financially stable, in a high growth period, and definitely effective in its organizational and low cost strategy. Spirit has fulfilled its promise in satisfying its shareholders.
The effectiveness of Spirit Airlines has surprised many. Although its planes have almost no leg room and high convenience charges, its product price point is unbeatable. Spirit satisfies its customers solely on a financial level, but it is a significant one. Its employees are not the best paid in the industry and are not looked after with care like South West or Jet Blue, but Spirit’s financials are to be envied by other airlines. Spirit Airlines are extremely effective at this moment in time in satisfying shareholders and a bit less with its customers, but if Spirit decided to take a bit more care for its employees, it would not be a surprise if Spirit became a heavy weight within the airline industry.
Works Cited
Arnoult, Sandra. "Flightglobal.com." Shutdown Continues after Spirit Pilots Reject 29% Base Pay Increase. Flight Global, 14 June 2010. Web. 07 Feb. 2014. http://www.flightglobal.com/news/articles/shutdown-continues-after-spirit-pilots-reject- 29-base-pay-343253/
"Company Financials." Standard and Poor 's. N.p., n.d. Web. 07 Feb. 2014. http://www.netadvantage.standardandpoors.com.avoserv.library.fordham.edu/NASApp/N etAdvantage/cp/companyFinancials.do
Martín, Hugo. "Spirit Airlines Thrives in the Cheap Seats." Los Angeles Times. Los Angeles
Times, 02 Aug. 2013. Web. 05 Feb. 2014. http://articles.latimes.com/2013/aug/02/business/la-fi-spirit-airlines-20130804
Nicas, Jack. "A Stingy Spirit Lifts Airline 's Profit." The Wall Street Journal. Dow Jones &
Company, 12 May 2012. Web. 05 Feb. 2014. http://online.wsj.com/news/articles/SB10001424052702304749904577384383044911796 "SAVE: Summary for Spirit Airlines, Inc.- Yahoo! Finance." Yahoo! Finance. N.p., n.d. Web.
07 Feb. 2014. http://finance.yahoo.com/q?s=save&ql=
"Spirit Airlines." Indeed.com. N.p., n.d. Web. 07 Feb. 2014. http://www.indeed.com/cmp/Spirit-Airlines "Spirit Airlines Reviews." Glassdoor. N.p., n.d. Web. 05 Feb. 2014. http://www.glassdoor.com/Reviews/Spirit-Airlines-Reviews-E13683.htm "Spirit Airlines Customer Reviews and Spirit Airlines Passenger Trip Reports." Spirit Airlines Customer Reviews. N.p., n.d. Web. 05 Feb. 2014.
http://www.airlinequality.com/Forum/spirit.htm