March Madness: Southwest vs. Spirit
Many Americans spent the last four days obsessed with “March Madness,” the moniker given to the annual National Collegiate Athletic Association basketball tournament in the US featuring 48 televised games over about 85 hours. Basketball fans watching the smorgasbord of games repeatedly saw a new commercial for Southwest Airlines, one of the tournament’s primary sponsors. The commercial caught my attention because, for the first time, Southwest appears to be targeting ultra-low cost carrier Spirit Airlines.
Spirit maintains—and Southwest in the past has concurred—that it is not stealing passengers from Southwest or any other airline, but rather is creating new passengers with its no-frills product in which fares are kept very low while fees are added for nearly all services. Speaking earlier in March at the ISTAT Americas 2015 conference in Phoenix, Spirit CFO Ted Christie talked about the fast-growing Florida-based ULCC’s “price aggressive” business model.
“There’s demand today at our price point, it’s just that no one [else] serves it,” he said. “The people we carry were there the day before we entered the market, it’s just that fares [on other airlines] were too high for them … We’ve fully unbundled the product and allowed our customers to pay for exactly what they want. The data suggests that on average we’re around 30%-40% cheaper than the comparable fare in the markets we serve, even when you take into account the [ancillary] options you add.”
Whereas Southwest blankets popular televised sports with ads, Spirit focuses much of its marketing on Internet campaigns featuring puppets, disrobing passengers and the occasional double entendre. And Southwest’s ads previously focused either on Southwest itself or differentiating Southwest from legacy US airlines like American, Delta and United. The new Southwest ad doesn’t directly mention Spirit, but it’s unmistakable to which airline it is referring.
“We invented low fares,” Southwest reminded basketball viewers in the commercial. “Then everyone else pretty much tried to follow. We call it the Southwest effect. But other airlines probably use more colorful language. Low fares. We don’t just have them, we invented them.”
The “more colorful language” reference—accompanied by one smiling Southwest employee rolling her eyes and another shrugging her shoulders—is clearly a shot at Spirit.
Why is Southwest suddenly worried about Spirit? Well, Spirit is growing aggressively (its capacity will rise 30% year-over-year in 2015) and the carrier is increasingly becoming an alternative in many markets Southwest serves. And while Spirit is definitely creating new passengers, perhaps Southwest is worried that its existing low-end leisure passengers could be starting to bleed to Spirit. Also, while Southwest more and more targets business passengers, it does not want to lose its signature brand recognition in the US as THE low fares airline: “Low fares. We don’t just have them, we invented them.”
The frenzy that is the four days of March Madness in which 64 teams are dramatically and quickly paired down to 16 has become beloved for, above all else, big upsets in which an established, powerhouse university loses unexpectedly to a scrappy, unknown upstart school. Often, these upsets occur because the well-known team doesn’t take its opponent seriously enough until, suddenly, it is late in the game and the underdog has too much momentum to be overcome. Southwest does not want to be “upset” by Spirit because it does not take its lesser known, smaller rival seriously enough. Southwest’s March Madness ad campaign, to me, is the first signal that Southwest does see Spirit as a potential threat that needs to be taken seriously.