Last week I wrote about Spirit’s flagging on time performance. Shortly after, I had a call with the airline’s Chief Operating Officer, Tony Lefebvre, to discuss what was happening. After talking to him, I got together with the masFlight guys and took a harder look at the numbers. After this deep dive, it seems pretty clear that Spirit is trading on time performance so that it can avoid missed connections, fly more flights, and not have to cancel any of them. Some may think that’s a good idea while others may disagree, but here’s why it looks the way it does.

I asked Tony straight up: what happened in April that made the performance start to fall down? He said that “we increased our flying significantly in Chicago and Dallas and we’ve been in LaGuardia but we’re flying a bit of a different service pattern in the market. Year over year, there’s been significantly more weather and ATC-related issues in those markets.”

New Routes Aren’t the Problem
It is certainly true that Spirit has moved away from its previous standing as basically a way to fly from the US into the Caribbean via Florida in recent times. The rapid and massive expansion around bigger cities in the US has created a new style of operation, one that is more prominent in the summer when Caribbean flying shifts. But did it really hurt on time performance? The data doesn’t make it look that way.

Yes, it looks like Chicago, Dallas, and Minneapolis did slow things down a little, but Spirit also put a lot of flights into places like Phoenix-Mesa, LA, Oakland, and Portland. Those cities helped to make up for the losses elsewhere so the impact should have been negligible. In fact, during the second quarter of this year, new routes ran on time 68.1 percent while existing routes were only 64.9 percent.

So if it’s not that, what is it? It doesn’t look like the problem started in April. Rather, it looks like Spirit got lucky this year with benign winter weather. Without that, we’re probably looking at lower performance during the winter as well. That makes it a broader question. Why doesn’t Spirit run on time as much as the others? It’s something about how Spirit structures the operation.

It’s Not the Block
The airline really pushes the boundaries when it comes to flying airplanes around to keep costs down. It tends to fly its airplanes over 13 hours a day. For a narrowbody operation, that’s incredible. (JetBlue is under 12 while Southwest is under 11.) How does it do that?

Part of it is, according to Tony, keeping block times short. The block time is the time from when the airline leaves the gate to the time it gets to the arrival city gate. If an airline wants to fly an on time operation, it can just pad its block times so that even if it leaves late, it will still arrive on time. It’s not a terrible thing to pad your block times if you can’t run a good operation but then you’re going to hurt your utilization and can’t fly as many hours in the day.

And for Spirit, utilization is huge. It runs its airplanes pretty hard these days and that means it can probably squeeze an extra flight versus what others would operate in a day. If it had to fly one less flight per airplane per day, you’re probably looking at an extra $3 in cost for every single seat on every flight. Spirit simply won’t be able to absorb that. So how does Spirit do on block time?

Tony said, “I have most of the competitors data on block performance and they tend to be 10 to 15 percent different. [American] has a little bit more block.” Since American flies a lot in Chicago, New York, and Dallas, that seemed like a good one for comparison. But the difference in block time isn’t quite as clear here. In a market like New York to Chicago, there is some variability. Today’s 835a flight from LaGuardia to Chicago on Spirit is blocked at 2h40m. That’s the same as American’s 910a departure but 15 minutes longer than American’s 750a departure.

Of course, these are just small examples but there isn’t a clear level of padding across the board here. On a broader scale, Spirit tends to complete about the same percentage of flights (if not slightly more) within the scheduled time versus American. That means it doesn’t look like American is really padding compared to Spirit. (United, however, does pad more and completes more flights within the scheduled block time, so the comparison versus the industry on the whole may be accurate.)

Spirit does, however, keep its ground time in between flights pretty short with little downtime. That means even when Spirit flies a flight that goes a few minutes over scheduled block time, there’s probably a higher likelihood of it delaying the next flight without much time to spare.

Whether or not this is a problem is a question for debate. It’s a strategy to have very little slack throughout the day. But that conflicts with another part of the strategy Take it away, Tony:

Holding for Connections

[In Ft Lauderdale] we didn’t have some of the daily occurrences we were dealing with in Chicago and New York, but we run an operation that’s a bank operation in Ft Lauderdale and one or two flights get knocked out of the system and it impacts your flying for the rest of the day. You don’t want to leave any customers stranded so you hold that bank.

Spirit connects fewer than 10 percent of its passengers, but it still runs a hub-style operation in Ft Lauderdale that can take connections. If flights are late coming into that bank, then Spirit will hold flights for people. Why? It may be good customer service, but the reality is that if it doesn’t do that, with Spirit’s high load factors and low frequency, there won’t be a way to get these people to their destinations. And then Spirit misses out on all those ancillary revenue opportunities that have proven to be so lucrative. So it makes sense for it to try to avoid missed connections.

On top of that, Spirit hates to cancel flights. It generally cancels under 1 percent of flights, and that’s certainly better than the industry. That means that while other airlines might cancel a flight (and it won’t show up in on time performance numbers), Spirit will just run it as late as it needs to. This may be a good thing for passengers, but as Spirit grows and establishes a presence in airports with worse weather events than Florida, it could backfire. (Anyone remember the Valentine’s Day disaster with JetBlue in New York?)

And as Spirit starts to put airplanes on more and more routes that are competitive with other airlines, the on time performance factor will become more important. The airline is changing a lot and that means it may need to constantly consider how it puts together its operation.

Spotlight on On Time Performance Coming Soon
For its part, Spirit says that it wants to run on time performance that’s in the middle of the pack. “It’s a pretty good barometer if you’re looking at industry comparative data and you’re not an outlier,” Tony told me. But it hasn’t been there yet. Some of these things are being addressed operationally. Tony said that they are better positioning their spare aircraft to be able to fill in around the system as it grows. They also have a new crew base in Las Vegas which is “fully ramped” at this point, so that should help as well by having more crews available in the west. (Then again, things seem to run more on time in the west anyway.)

In the end, we might see some changes out of Spirit simply due to visibility. It expects to be big enough this year that it will have to begin reporting to the DOT next year. When that happens, the airline’s performance will have a bigger spotlight shined upon it. And that might be enough to get Spirit thinking about the best way to handle the trade-off of delays, missed connections, and cancellations.

It turns out United isn’t the only airline suffering from poor on time performance these days. Spirit hasn’t had more than 70 percent of flights arrive on time since April while Allegiant seems to be in the same boat. That’s not good. Why haven’t you heard about this? Because it isn’t easy to find.

The Department of Transportation only requires airlines with more than 1 percent of total domestic scheduled service passenger revenue to report this data for its monthly report. For everyone else, it’s optional. The only one who voluntarily reports is Mesa, and I imagine that’s because it used to be big enough that it had to report at one time.

But neither Spirit nor Allegiant report, so how did I get the data? Oh, it’s out there in one form or another. I turned to my two favorite tools, masFlight and FlightStats, for details. Here’s how it looks:

This shows arrivals within 14 minutes of schedule, the number used by the DOT to designate a flight as being on time. The green line is the DOT average for the industry. That data has only been released through June so it stops a little short. The red line is Spirit’s data from masFlight. The August 2012 one only goes through August 25 since, well, August isn’t over yet. And the blue line is Allegiant’s info from FlightStats. The problem with Allegiant’s data is that you can’t find that airline’s on time performance info anywhere, including on its own website. So this uses the runway departure and arrival times. That means if anything, Allegiant’s data is overstated. It takes a little more time to get to the gate, so that could make even more flights late if they had those details.

What you can see is that Spirit and Allegiant have fairly consistently lagged the industry. For Spirit, things really fell off a cliff starting in May. It’s interesting to note that July and August of last year were also pretty terrible for the airline, but that doesn’t necessarily mean those are seasonal issues. It could be coincidence. But if they are connected, then you would hope Spirit would have learned from its mistakes last year and fixed them for this year.

Allegiant, meanwhile has been terrible more often than not. It has had a couple of random months where on time performance has looked at least half decent, but then it falls right back down again.

Regardless of what is causing this (neither Spirit nor Allegiant responded to my request for comment), it’s a real problem. Ultra low cost carriers can get away with a lot since people are willing to endure a great deal to save money. But a poor on time record is generally one of the things people won’t accept. This is particularly true for an airline like Spirit, which allows connections. It’s bad to be late, but it’s really bad to miss your connection when you could be stuck for awhile.

Even Ryanair, the king of the ultra low cost carriers, knows this fact. According to Ryanair’s own reporting, it tends to hover around 90 percent on time. Even if you don’t believe that, this independent look at arrivals at UK airports shows that Ryanair is certainly above 80 percent for the last couple years.

What does this mean? Well, every airline needs to run an on time operation to keep it customers happy but it’s particularly important for ultra low cost carriers since there isn’t generally a high level of service to fall back on. Spirit and Allegiant seem to be falling down in this area. If they don’t get their acts together, they’re going to have a hard time getting people to keep buying tickets.

Spirit has been aggressively growing Dallas/Ft Worth service lately, but not all routes have been successful. Notably, DFW to Boston hasn’t worked out well. For the Fall, it is being re-timed to operate during the day and then it stops completely for the winter. This got me thinking about whether JetBlue might be a Spirit-killer.

In Boston, I kept thinking that JetBlue’s new 3 daily flights were having an impact, so I decided to dig deeper into that by looking at other markets where the two go head to head. The result? It does appear that Spirit is running away from the Blue Crew despite lower fares and lower costs.

I figured the best place to look would be in Ft Lauderdale, where Spirit has long had a big operation. JetBlue has been building its presence there over the last few years as well. I started with schedule data to see if there was a pattern.

Spirit Cuts Where JetBlue Grows
I took July Ft Lauderdale schedules for the last four years and started crunching. There are ten routes that have Spirit and JetBlue competing head-to-head. They are Bogota, Boston, Cancun, Washington/National, Kingston, LAX, New York/LaGuardia, Nassau, Santo Domingo, and San Juan. How did capacity fare? Take a look at this chart.

As you can tell, Spirit has been slowly growing the markets where it doesn’t compete with JetBlue. Contrast that with the head-to-head routes where Spirit has shrunk dramatically. We should refine the data further before just coming to a conclusion, however.

Bogota and Kingston have only recently seen JetBlue start service so it’s probably too early to see any impact there. And we can throw out Washington/National as well. Even though that route has seen growth from Spirit in this chart, it’s now gone. In another sign that Southwest is far from the scary competitor it used to be, Spirit has decided to walk away from National and its 3 daily flights each on both JetBlue and US Airways in favor of Baltimore, where it will face Southwest and AirTran’s now 10 daily flights.

If we look at the remaining seven markets, the results have been pretty clear. In six of those markets, Spirit has cut capacity dramatically (only LAX has been flat). If we look at July 2012 vs July 2011, Spirit had 8 routes from Ft Lauderdale that saw capacity drop more than 25 percent. Five of those routes were head-to-head with JetBlue. (The others were Charleston, WV, which was dropped after one year, Aguadilla, PR, and Saint Maarten.)

Spirit Usually Loves Competition
Now, I know the natural response here. “Well of course Spirit is cutting flights where there’s a lot of competition. It’s better off going where there’s none.” That would make sense if we were talking about Allegiant, an airline which generally shies away from competition. But Spirit has done the exact opposite. It thrives on routes that are already served.

This is the airline that went into the Vegas to LA market, one that’s served by American, Delta, Southwest, and United. (Even US Airways served it at the time.) It has been rapidly growing in Dallas where it goes head-to-head with American pretty much everywhere. And as I just mentioned, it left Washington/National to go head to head with Southwest from Baltimore to Ft Lauderdale.

Of course, for Spirit, this all makes sense. It goes in with low frequencies in many of these markets and says it isn’t competing with the incumbent carrier. It’s going in with rock bottom fares to help those who care about price above all to fly. This strategy even works with Southwest. That won’t come as a surprise to anyone who has seen Southwest’s costs and its fares climb over the last few years.

Spirit’s Fare Troubles
But JetBlue appears to be a more formidable competitor for Spirit for some reason. The natural question is whether or not JetBlue is actually a tough competitor or if the airline is just irrational and Spirit wants to avoid going up against that type of behavior. Maybe JetBlue is flooding the market with too much capacity and is losing a ton of money. I figured I had to look at the fares.

Unfortunately, government fare data is only domestic. It’s also quarterly and only goes through the end of 2011 at this point, so I looked at fares flown during the third quarter of 2009-2011 to match the summer season capacity numbers. This data is notoriously buggy, but I’ve tried to clean it best I could.

Since the data doesn’t include international, there weren’t many good routes to look at here but I grabbed a cross section for my first look. I had long time competitive routes to San Juan, Boston, and LaGuardia. I included more recent competitive routes at LAX and National. Then I threw in Spirit routes without JetBlue as well to Atlantic City and Atlanta. Here’s what I found when I looked at year-over-year fare change in Q3.

And look at that. Atlanta and Atlantic City saw strong fare growth, which would mean we shouldn’t be surprised to see the big capacity increases in 2012. LAX did fairly well too. That may have some real impact from Virgin America being in that market, but either way, we don’t see Spirit cutting capacity there. National is middling but at the bottom we see the hottest competitive routes with JetBlue where Spirit is cutting seats. Boston, LaGuardia, and San Juan all saw lower fares in summer 2011 than in 2010 on Spirit and now, capacity is going down further.

But is JetBlue Winning?
The picture is getting a little more clear here. Fares haven’t been holding up as well in these JetBlue-competitive markets so Spirit is cutting back. But are fares not holding up as well for both airlines? Or is this Spirit feeling the heat because JetBlue is thriving?

I decided that the best markets to look at would be LaGuardia and San Juan. The results are pretty telling. Let’s start with LaGuardia.

This shows available seat miles (ASMs) which are the best measure of capacity in the market. It also shows average fare. In LaGuardia, JetBlue kept capacity relatively flat last year but fares rose. This year, it added a bunch of capacity and Spirit walked away. But LaGuardia is somewhat constrained by slots, so I really view San Juan as the purest route since it doesn’t have capacity constraints and they are the only two players.

In 2010, they were both really steady compared to 2009. But in 2010, JetBlue bumped up capacity a lot and Spirit cut it. JetBlue’s fares started to climb while Spirit’s fell. That led Spirit to cut capacity even more in 2012 while JetBlue grew.

We don’t have perfect data, but from what I see, it looks like Spirit is running from markets where JetBlue dominates. It isn’t happening everywhere – LA for example, but it appears to be happening in a lot of places. That’s a strange thing since Spirit has much lower fares and much lower costs as well. But maybe people are gravitating toward the far superior onboard product with JetBlue.

As JetBlue continues to expand from Florida and in the Caribbean, I wouldn’t be surprised to see Spirit cut back further and move to other cities where it is better able to compete. This would seem to say that it’s not ALL about price. JetBlue is giving Spirit a run for its money.

You’ve probably seen at least one of the dozens of stories reporting on how Spirit is going to charge $100 for a carry on bag. Those stories are incredibly misleading at best. If you’re an honest customer, there’s no way you’re going to pay $100 to carry a bag on the plane. And that’s exactly why it’s there, to punish those who aren’t honest.

I wasn’t going to write about this, but after seeing all the misinformation out there, I figured I should chime in with what’s actually happening. Here’s the story.

I actually hate the phrase “carry on fee,” because that’s not really what it is. It’s an overhead bin space fee. You can still bring on a bag without charge on any Spirit flight as long as it fits under the seat in front of you. But if you need to put a bag in the overhead bin, then Spirit will charge you and has done so for the last 2 years. It recently announced fee changes that begin on November 6 of this year, and one of those fees is $100. Will you have to pay the $100? Only if you’re dishonest.

Spirit has created a structure that gives you incentive to sign up for bin space in advance, because it will cost you less. The cheapest way to do this is to be a member of the $9 Fare Club. That’s a club that costs $59.95 a year and gets you access to fare specials, discounts on fees, etc. If you fly Spirit more than a couple times a year or if you have a lot of bags, it probably makes a lot of sense. Members of that club pay $25 per bag for bin space in advance, and it goes up from there. Here’s the rundown on a per bag basis:

Does Spirit have way too much complexity in here? Yeah, probably. It’s hard to wrap your head around all these different prices, but the concept is easy. Do it early and do it yourself and it’ll be cheaper.

If you book online at spirit.com, then you can sign up right there during the booking process for $35. Piece of cake. If you book through an online travel agent, then you have no clue what’s happening because they don’t do a good job of incorporating fees in any way. But you can still come to spirit.com and make that purchase if you know about it.

But let’s say you don’t know about the carry on fee because the online travel agent didn’t tell you. Or let’s say you just didn’t know in advance whether you were going to have a carry on or not. Well, you can still get it during the online check-in process for $40. What if you aren’t tech savvy at all? Then you can pay $50 when you check in at the airport ticket counter. I’ll agree that it is pretty awful when you show up to check in after having booked on an online travel agent site only to find that you have to pay for bin space. The online travel agents need to do a better job with that if they’re going to sell airline tickets. But the fee still won’t be more than $50.

So who is it that’s paying that $100 fee the media has been jumping on? Crooks. That is a fee for those people who blatantly disregard the requirement to pay for a carry on with the hope that they’ll be able to sneak it on the airplane at the gate. That’s a real pain for everyone when they try to do that, because the gate agent will see it, stop that person, and have to take them out of line to process the fee. It slows down the boarding process.

In other words, this fee is completely punitive. Spirit would like nothing more than for there not to be a single person to pay this fee. That means everyone is doing it before security, and that makes boarding much quicker. I think that particular $100 fee is a pretty smart way of creating a disincentive. If you don’t like it, then don’t try to game the system.

Live Chat: Children on planes – Canada.com
I was one of the panelists for a live chat about kids on airplanes. You can see the transcript at the link above.

The Midwest Cookie Is Dead and Other Important Airline News – Conde Nast Daily Traveler
This week, I did a round up of the death of the Frontier cookie, Spirit’s growth in DFW, and Southwest’s expansion into AirTran markets.

Allegiant Air begins charging passengers for carry-on bags – The Madeleine Brand Show
I was on the show to talk about Allegiant’s new carry on bag fee and had a good discussion.

Dallas Tornadoes and DFW Airport: What Travelers Should Do When Flights Are Cancelled – Conde Nast Daily Traveler
When storms hit DFW this week, scores of flights were canceled and people were stranded. We were able to help our clients get home quickly. Here are suggestions for handling these types of events.

In the Trenches: Hired – Intuit Small Business Blog
It’s finally happened. I’ve hired my first employee. While it was a long road to get here, I’m glad that it’s done.

Continental’s Airline Quality Rating dropped out of Top 10 in 2011 (take our poll) – Cleveland Plain Dealer
I was asked about the Airline Quality Rating, which I don’t put much stock in.