Spirit Airlines 2011 Annual Report Download - page 15

our website, www.spirit.com, as the primary platform for ticket sales and 67.1% and 76.5% of our total tickets sold during 2011 and 2010 ,
respectively, were through direct internet bookings using our website. After our website, our next largest distribution source is travel agencies,
which represented approximately 22.5% and 14.0% of sales for 2011 and 2010 , respectively. An additional 10.4% and 9.5% of our total tickets
sold during 2011 and 2010 , respectively, were fulfilled through our outsourced call center.
Our distribution costs are more than 100% covered by our distribution fees. Sales through our website represent our lowest cost
distribution channel and it is the channel through which we offer our lowest fares. For all other channels, we generally charge incrementally
higher fares and user fees with the objective of causing the users of those other channels to bear the additional costs.
We were among the first carriers to charge customers a fee for making reservations through a call center, instead of online. We have
outsourced our call center to a third-party provider and share a percentage of the booking fee received on ticket sales with that provider.
Travel agencies are invited to establish a sales account with us to enable access to the fares offered on our website. We maintain a zero
percent standard commission policy for travel agency bookings worldwide unless local regulations mandate them. We also have agreements with
all the leading GDS companies. GDSs provide flight schedules and pricing information and allow travel agents to electronically book a flight
reservation without contacting our reservations facility. We do not, however, have full content agreements in place with any GDS company,
which means we are not required to provide them with access to all of the fares we have on offer on our website. Such an arrangement allows us
to sell higher fares through GDSs, thereby covering the cost of these arrangements. Similarly, we release our fares to OTAs only if we are
permitted to withhold our lowest fares from this distribution channel. For example, tickets purchased on Travelocity and Orbitz are at prices
higher than on our direct website to cover their incremental costs of distribution through these OTAs.
Marketing
We are focused on direct to consumer marketing targeted to our core price-sensitive customer who pays for his or her own travel costs.
Our principal marketing message is our low base fares. Consistent with our ULCC business model, we use a simple marketing message to keep
marketing costs low. We spent approximately 0.2% and 0.5% as a percentage of total revenues on advertising for 2011 and 2010. We do not
engage in general brand or product marketing. Similarly, since our core customers are individual consumers, we do not have a direct marketing
or sales function that calls on corporations, government agencies or similar large buyers of business travel.
Our principal marketing tools are our proprietary email distribution list consisting of over five million email addresses and our $9 Fare
Club as well as advertisements in online, television, radio and other channels. Our objective is to use our low prices, price-based promotions and
creativity to produce viral marketing programs that are extremely cost effective and achieve outsized website traffic and revenue productivity
compared to our competitors. In 2011 and 2010, the number of unique visitors to our website each month was 4.0 million and 3.5 million,
respectively.
The $9 Fare Club is an annual subscription-based service that allows members exclusive access to the lowest fares on offer and discounted
baggage fees. Much like that of Sam's Club or Costco, where members pay an annual fee in order to obtain volume based discounts, $9 Fare
Club members pay $59.95 per year for first access to offerings of our lowest fares. The membership provides benefits such as guaranteed
exclusive, member-only fare sales (at least once every six weeks) and private offers on hotels, rental cars and other travel necessities.
Frequent Flier Program
The FREE SPIRIT frequent flier program was initiated in 2006 to develop customer loyalty and enable sales of miles to marketing
partners. The FREE SPIRIT MasterCard is the primary vehicle whereby customers earn miles and our frequent flier program is geared
specifically towards supporting adoption and continued use of the credit card.
In 2011, passengers paying with FREE SPIRIT travel awards represented less than 2% of our total passengers. FREE SPIRIT offers award
travel on every flight without blackout dates. There are four types of travel awards, Off-Peak, Standard, Peak and Premium, and awards start
with as few as 5,000 miles for customers who also hold the FREE SPIRIT MasterCard. Status levels are different than at other programs because
all miles are eligible for status whether earned by flying, through bonus miles, special offers, or through spending on the FREE SPIRIT
MasterCard. The program also calculates a year-end status level, and currently miles never expire as long as a customer is active at least every
three months.
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