Environment Analysis of Spirit Airlines
Introduction
The aviation industry remains to be one of the fastest growing business in many countries. Air travel is a central key in fostering globalization, as it helps promote the growth of many other industries. This paper aims to provide a comprehensive environmental analysis of Spirit Airlines, Inc which is an ultra low-cost air carrier based in the Florida, and carries passengers on flights within the United States as well as in key cities of Latin America. It is interesting to note that despite several controversies ranging from contentious advertising campaigns, discrimination and poor customer service among others, the Spirit Airlines remains to attract a higher number of customers. This paper will first deal with the discussion of the external environment that affects the overall operation of Spirit Airlines, followed by the internal analysis that reflects on its overall business strategy. The study of both the external and internal environment of Spirit Airlines will provide a preview of its past business plans as well as the possible strategies that will boost its growth.
As important as any other aspects of the business, the external environment has a considerable effect on the overall performance of the airline industry. The external environment of Spirit Airlines is best analyzed using the PEST framework which is comprised of the political, economic, social, and technological (Rahman et al, 2015).
Political- Recently, there are many political changes that were planned and implemented that greatly impacted the aviation industry in the United States. Government interventions are political factors, of which the airline industry has no control. For instance, the progress of Spirit Airlines, and other airlines in the country were threatened by the increasing tax rates on the different transportation industries. Currently, there is a likelihood of tax increase as the Senate moved for the passage of a resolution that is likely to require an increased Transportation Security Administration (TSA) tax, twice over by 2017 (CAPA, 2013).
Economic Factors- There is a direct link between the overall performance of the aviation industry and the economic growth of a country. An increased domestic product results to higher disposable income, thus, there is an increased probability that consumers will expend more on goods and services such as leisure travelling.
Social Factors- Another factor that has a considerable influenced on the aviation industry operation is the social and demographic factors. It was noted that there is an increased number of air travelers in recent years, and this is attributed to the change in the transportation preferences among the younger population.
Technology Factors- A strong driving element that improves the efficiency of the aviation operation is the technological advancements that has impacted the industry through the reduction of costs. With the more efficient IT technology, services is enhanced which leads to better customer experience (Rahman, 2015).
The Competition
The competition between the aviation industry players is also very rigid, with Spirit Airlines faced with other low-cost rivals that are determined to be their best, not only to survive, but also to make their mark as one among the best air travel providers. Two of the top competitors of the American Airlines Group and the JetBlue Airways Corporation. The American Airlines Group merged with US Airways in the later part of 2013 and has since extended its operation its operation in other regions, on the other hand, the JetBlue Airways capitalize on low fares and quality customer service to snatch a large share of the travelling market.
Threats Faced by Spirit Airlines
There is a long list of challenges that face the aviation industry during the 21st century and the players must learn to adapt flexible strategies in its operation. One of the threats is the increased competition with other air travel providers who recognized the importance of enhancing management and customer relations (Wensveen, 2012). Moreover, while Spirit Airlines is known for offering low-cost fares, this competitive advantage is not sufficient to continuously hold a large market share. Other threats include the rising fuel prices, government regulations, and the threat from transportation substitutes.
Internal Environmental Analysis
In the ‘about us’ page of Spirit Airlines, it says: “Spirit Airlines is the ultra-low cost airline of the Americas and Home of the Bare Fare. Spirit’s fares are unbundled; they simply reflect the cost of taking customers to their destinations without any extras”(Spirit, 2016). Based on this statement, one can infer that it is the mission of Spirit Airlines to allow flexibility of choices for its passengers while giving them the opportunity to travel at a lower cost. Accordingly, the internal analysis of Spirit Airlines can be categorized into it’s a) corporate level strategy, b) business level strategy and, c) Functional level strategy.
Corporate Level Strategy
The corporate level strategy of Spirit Airlines is summarized through its business model which is to focus on the niche of catering to low-cost domestic flights throughout the United States. In contrast to larger airlines, Spirit was able to maintain stability despite the tumultuous times by sticking to its strategy of concentrating on price-sensitive travelers. The long term direction of the company can be inferred from its strategic model as a low-cost airline.
Business Level Strategy
The business strategy of the Spirit is almost the same as its corporate strategy, that is, it focuses its strength on its ability to provide services at lower cost than the competitors. The management has strategically focused on the narrow market of leisure travel and visiting friends and relatives division. The management is bent on concentrating on this niche, with the idea that a plan to diversify to other segment such as business travelers may not be viable.
Functional Level Strategy
Down on the route map, Spirit airlines is faced by diverse competitors on its varied destinations. Yet, it was able to snatch a considerable share in the airline travel and this can be attributed to its product and fare structure. By focusing on a narrow customer niche and coupling its services with a considerably lower price, Spirit was able to create a demand for its flights, thus seizing the price-sensitive passengers from other carriers (Elian & Cook, 2013).
Accordingly, Spirit Airlines have achieved success in attaining a competitive advantage, and with such, it can gradually diversify to cater to the increasing demand for low-cost international travel other than those that it currently served in the Carribean and Latin America. However, it is also recommended that the management should reconsider the other aspect of Spirit that has been neglected in the past, that is, to provide a more positive customer experience. Despite its success in capturing a significant number of customers due to its low-cost and unbundled pricing strategy, the management should also recognize the importance of customer orientation. While there are many customers who would endure poor customer service in exchange for a cheaper plane ticket, the high number of customer complaints is not also good for the image of an airline that is advocating to diversify its services to other regions.
References
CAPA Centre for Aviation. (2016). US airlines finally find business stability, but government intervention threatens to thwart profits. Retrieved from http://centreforaviation.com/analysis/us-airlines-finally-find-business-stability-but-government-intervention-threatens-to-thwart-profits-10
Elian, J., & Cook, G. (2013). Spirit Airlines: Achieving a competitive advantage through ultra-low cost. Journal of Aviation/Aerospace Education & Research, 23(1), 23-34.
Rahman, K., Azad, S., & Mostari, S. (2015). A competitive analysis of airline industry: A case study on Biman Bangladesh Airlines. Journal of Business Management, 17(4), 23-33.
Spirit Airlines. (2016). About Spirit. Retrieved from http:////www.spirit.com/AboutUs.aspx
Wensveen, J. (2012). Air transportation: A management perspective. Ashgate Publishing, Ltd.,.
