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DOT Charges Spirit Airlines (SAVE) With Hefty $350,000 Fine

Zacks Equity Research
·3 min read

The U.S. Department of Transportation (DOT) slapped a hefty fine on budget carrier Spirit Airlines SAVE for violating its rule pertaining to oversold seats. Notably, Spirit Airlines wrongly classified more than 1,000 passengers as “volunteers” when they were actually passengers who were denied a boarding pass on the Miramar, FL-based carrier’s oversold flights.

While reviewing complaints filed by consumers with the DOT, its Office of Aviation Consumer Protection found that Spirit required passengers, who were involuntarily denied boarding on its flights, to sign waivers or documents suggesting that they were “volunteers”. The review also showed that on many occasions between January 2017 and June 2018, Spirit’s compensation offered to those passengers through travel vouchers was less than adequate. Per federal law, such passengers had the option to receive cash or a check.

Notably, the department’s oversales rule permits a carrier to sell more tickets than the number of seats to be used in the flight. The rule enables carriers to obtain operational efficiency by filling in seats that would otherwise go empty due to “no shows”.

However, the misclassification and subsequent filing of incorrect reports with the department irked the same, which consequently imposed a fine of $350,000 on Spirit Airlines. Notably, the budget carrier submitted inaccurate reports pertaining to passengers denied boarding for six consecutive quarters starting the first quarter of 2017. Apart from levying the fine, the department ordered the currently Zacks Rank #3 (Hold) carrier to stop the practice going forward.

Further, the presently Zacks Rank #4 (Sell) Latin American carrier Copa Holdings CPA was also fined by the DOT recently. Per a Reuters report, Copa was fined $450,000 for violating a May 2019 order and transporting passengers between the United States and Venezuela by using a stopover point. Like Spirit Airlines, the department warned Copa Holdings against repeating such malpractices in the future.

Key Picks

Investors interested in the Zacks Transportation sector may consider a few better-ranked stocks like Air Lease Corporation AL and Teekay Tankers Ltd. TNK, both currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Air Lease's earnings surpassed the Zacks Consensus Estimate in two of the last four quarters (missing estimates in the other two).

Teekay Tankers' bottom line surpassed the Zacks Consensus Estimate in each of the last four quarters.

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Air Lease Corporation (AL) : Free Stock Analysis Report
Copa Holdings, S.A. (CPA) : Free Stock Analysis Report
Spirit Airlines, Inc. (SAVE) : Free Stock Analysis Report
Teekay Tankers Ltd. (TNK) : Free Stock Analysis Report
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