What do you do when you’re known for lousy service? You disclose it. Our “risk factor of the day” provided by Spirit Airlines:
Negative publicity regarding our customer service could have a material adverse effect on our business.
In the past we have experienced a relatively high number of customer complaints related to, among other things, our customer service, reservations and ticketing systems and baggage handling. In particular, we generally experience a higher volume of complaints when we make changes to our unbundling policies, such as charging for baggage. In addition, in 2009, we entered into a consent order with the DOT for our procedures for bumping passengers from oversold flights and our handling of lost or damaged baggage. Under the consent order, we were assessed a civil penalty of $375,000, of which we were required to pay only $215,000 based on an agreement with the DOT and our not having similar violations in the year after the date of the consent order. Our reputation and business could be materially adversely affected if we fail to meet customers’ expectations with respect to customer service or if we are perceived by our customers to provide poor customer service. Our business and reputation could have been harmed by the business shut down during the June 2010 pilot strike and any perceived failure to meet customer expectations during the strike and related negative publicity from the strike
Notice that the risk isn’t that Spirit Airlines might perform poorly. The risk is that its poor performance may become more widely known! Now that IS a business risk.