Spirit Airlines has just filed for Chapter 11 bankruptcy protection, after years of losses, plus a failed takeover attempt by JetBlue. The good news is that it will be business as usual for passengers, and the company already has an updated financing plan, and hopes to emerge from its restructuring in the first quarter of 2025.
The thing is, Spirit’s issues aren’t just the carrier’s massive amount of debt, but also the company’s lack of profitability since the start of the pandemic. It’s great to address debt issues, but how does the airline plan to return to profitability? Spirit has shared some details about its planned transformation, so let’s take a look.
In this post:
How Spirit Airlines hopes to return to profitability
@IshrionA flags the details of Spirit Airlines’ transformation plan. While it’s somewhat light on details, the airline has shared a variety of priorities going forward.
When it comes to the passenger experience, we know that Spirit has already been transforming its business model, by eliminating change fees, and even introducing new fare bundles, more in line with what the legacy carriers offer. Beyond that, the airline is planning some other major changes:
- Spirit Airlines plans to introduce free Wi-Fi for all members of its Free Spirit program, with standard economy getting free browsing, and premium passengers getting free streaming
- Spirit Airlines plans to offer free water and small snacks for all passengers, with other items available for purchase
- Spirit Airlines plans to update the interiors of jets, including introducing in-seat power, plus larger overhead bins
- Spirit Airlines wants to revise its premium offerings, potentially introducing an extra legroom economy section, possibly in lieu of the current product with blocked middle seats (in addition to the carrier’s “business class” equivalent)
Spirit Airlines also plans to overhaul its route network. Part of this will include exploring codeshare and joint venture opportunities. Beyond that, the airline has identified the following opportunities:
- Redeploying 20-30 aircraft from the cities with the lowest revenue performance
- Relocating aircraft to top “value seeker cities” in different regions to gain relevance (targeting 50% seat share); the plan is to first focus on Fort Lauderdale (FLL), and then develop additional focus cities in early 2026
- Achieving stronger pricing power (generally 5-10%) in new cities with increased market relevance
- Increasing the amount of flying in markets with less than daily service, as a low-risk way to expand and explore new markets
- Increasing seasonal flying, by operating routes during peak seasons when profitability is substantial, while limiting or fully removing capacity in off-peak or shoulder periods
- Maximizing “out and back” flying, where the same plane and crew starts and ends at the same airport each day, to limit operational issues
My take on Spirit Airlines’ turnaround plan
As much as the “big three” US carriers have seen a pretty good post-pandemic rebound, the reality is that the airline industry continues to be really rough. Delta and United are the only substantially profitable US airlines, and much of their profits from their loyalty programs, their premium offerings, and their long haul network.
The reality it’s really hard to turn a fair profit by simply flying passengers domestically, without profitable premium offerings or co-branded credit cards. In that sense, Spirit and other airlines are kind of in a tough spot. Obviously a better balance sheet is a good start. I’m rooting for Spirit, though it sure feels like more is needed here:
- In-seat power, bigger overhead bins, free water, and free Wi-Fi, isn’t suddenly going to make the airline profitable
- Things like deploying aircraft from the lowest revenue performance airports seems like something obvious that would be done on an ongoing basis, rather than some amazing new revelation that’s going to turn around the airline
For example, JetBlue is an airline with a great passenger experience, which passengers enjoy flying, and which has a strong presence in some major airports. Still, the airline is seriously struggling with profitability.
Personally I think the industry still needs some consolidation. Not because I’m some pro-corporate guy who loves consolidation, but rather because an industry isn’t healthy when so many of the players are losing money.
This is purely speculation on my part, but I wouldn’t be surprised if a Spirit and Frontier merger is revived once again, once Spirit’s balance sheet is looking a bit better. It still seems like there’s a lot of merit to having a major national ultra low cost carrier (though… neither airline is really an ultra low cost carrier at this point).
Bottom line
Spirit Airlines has filed for Chapter 11 bankruptcy protection, and has unveiled its restructuring plan. It should be business as usual for the carrier, though the airline is planning some updates to both the passenger experience and its route network.
I still struggle to see how Spirit will return to profitability, just due to the overall situation the industry is in, with high costs and lots of competition. The limited number of profitable airlines are making much of their money from credit cards and premium revenue, and that’s something that’s harder for small carriers to fully tap into.
What do you make of Spirit’s transformation plan?
Their reputation is terrible. I've never flown Spirit, and none of my friends recommend it after their experience with Spirit. I'd rather pay a little extra to fly others in case some unforeseen circumstances occur; I have a backup option. I am surprised that Frontier is doing good???
First of all, I thought Spirit already concentrated on out and back flying -- that's nothing new. Spirit and its ilk are largely responsible for the basic economy fares that we've seen on legacy carriers in these past few years. For a while now, the conventional wisdom was that ULCCs were more capable of turning a profit than legacies. Now it turns out that, at least in the US, that isn't necessarily the case. So...
First of all, I thought Spirit already concentrated on out and back flying -- that's nothing new. Spirit and its ilk are largely responsible for the basic economy fares that we've seen on legacy carriers in these past few years. For a while now, the conventional wisdom was that ULCCs were more capable of turning a profit than legacies. Now it turns out that, at least in the US, that isn't necessarily the case. So we as consumers are left with legacies offering less and ULCCs that are struggling. Thanks a lot.
Spirit needs to figure out what its strength is/what differentiates it from its competitors. Is it its route network? (Probably not, since it mostly followed legacies into routes that were already being served.) Its hard product? (Only for those who love sitting in the fetal position for the duration of the flight.) Its soft product? (Only if your kink is being treated like a steer on its way to slaughter.)
There were some rare instances where Spirit offered a better value, even when taking into account ancillary fees - but for the most part, Spirit's main source of profit in the past several years seems to be passengers who don't realize that their fare doesn't include seat selection, carry-on bags, soft drinks, oxygen, etc.
A decade of airline consultants chanting "customers only care about price" was completely wrong.
Customers care about comfort and dignity and are willing to pay a little extra for it.
I’d agree but add dignity more than comfort. It is spirit’s reputation that will be the biggest hurdle to commanding higher fares. JetBlue is a good testament that people won’t really pay more for marginally more comfort.
I think at this point we have to be honest with ourselves and review the statistics regarding the percentile success rate of companies that manage to stay out of Chapter 7 within 6 months, 12 months, 24 months, and 60 months of filing Chapter 11. I am sure business majors can easily quote this figure off the top of their heads versus this history major, but like most i find graphs far more interesting.
The stock price is $1.08. They sell a can of Coca Cola in flight for $4.50. Let that sink in.
Maybe if gets down to around 50 cents a share when you buy an overpriced can of soda for $4.50 the flight attendant will print out a stock certificate in your name for one share as a purchase incentive.
+1
What did Spirit change with "Saver$ Club"? One of the slides mentions "future Saver$Club Strategy" under Phase 2 - rest of 2024
Perhaps if the Biden Administration had allowed a merger with Jet Blue or Frontier, this could have been avoided?
Yes, it would have different. It would have been B6 declaring bankruptcy, and I would have had to fork out good money for a few good bottles of champagne to celebrate. Stop trying to blame the administration for everything. Death to Mango Mussolini. Death to Hillbilly Bear. Death to Corny Cowboy.
Essentially Spirit is walking away from the ULCC business model because it doesn't work. But their path while probably the only way forward isn't guaranteed. They will lose part of the population that can only fly with $49 fares. Their reputation particularly in the era of social media makes attracting new flyers tough, not to mention all the legacies offer a similar product.
I agree their reputation is a major challenge. even if the product improves greatly, a large portion of the population will continue to skip right past it because they don’t want to be seen flying ‘spirit’.
Strategy changes to increase revenue aren’t normally part of a bankruptcy reorganization plan. The point is to do some combination of cost cutting and debt service reduction that puts the company in a stable state going forward.
Garbage airline that flies garbage planes filled with garbage passengers. Too bad it wasn't Chapter 7.
Show us on the doll where Spirit hurt you.
On my lower back and knees from the one time I flew them, Ned. And you know me under another name from other sites. Figure it out and you would realize my opinions regarding ULCCs, B6 and Dl (all highly negative).
Nothing has brought endless person arrested at the airport You Tube videos for doing (fill in the blank) than these 2 airlines. Yes, I very much would like to see the ULCC business model fail. Back in the 70s when I was growing up flying was a pleasure, not a chore. Sure, fewer people could fly but no one complained. Not to mention fares can be lower than 70s levels today because of technology and...
Nothing has brought endless person arrested at the airport You Tube videos for doing (fill in the blank) than these 2 airlines. Yes, I very much would like to see the ULCC business model fail. Back in the 70s when I was growing up flying was a pleasure, not a chore. Sure, fewer people could fly but no one complained. Not to mention fares can be lower than 70s levels today because of technology and the hub and spoke model which is a much more efficient use of assets.
Sorry no need for $39 fares.
You don’t wanna miss aunties annual bbq in STL. Arrive hangry. Throw in a 7hr connection thru BWI .
Why the focus on FLL? It’s not exactly a premium city & MIA has the scale to vacuum up higher spending.
@CF Frost
They serve the Carribean, Central America , and South America out of FLL.
What can be done to reduce the expense of operating domestic flights that won't impact the customer experience? It seems like overregulation and fees that airlines incur are what is making it difficult to offer these services in the United States.
They need more of a premium seat offering, not just the 'block the middle seat' nonsense. That's a glaring difference between them and the majors, a huge opportunity to grab share, and a major differentiator between them and the other LCC. More legroom = More $$
They already have (and have long had) a premium seat offering - seats similar to other domestic airline first class with more legroom at the front. 2x2 seating.
I’ve enjoyed flying Spirit and hope they can turn it around. Already noticed fares have gone up in the markets they exited from MCI. :(
Therex are only two groups of people who "enjoy" flying NK: trailer trash and brain tumor sufferers.
They deserve to fail. For years, they intentionally made the experience of traveling with them as miserable as possible. Nothing will restore any faith that they can become a decent and respectable business. They have a ValuJet problem. The silly yellow airplanes, plastic city bus seats and abysmal outsourced-everything "service" has finally come full circle.