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.
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?
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