Spirit Airlines

Spirit and Virgin America show drasticially different outcomes from capacity growth

US carriers Spirit Airlines and Virgin America recorded higher than average capacity growth during 2011. But the similarities ended there as Spirit recorded healthy profits that continued into the first quarter of this year while Virgin American continued to mount losses as fuel expense and the spool-up of new markets continued to the crimp the carrier’s bottom line.

While Virgin America concludes it is still in growth mode, it has only recorded one profitable quarter in its five-year history, and only four quarters of operating profits. Unlike Spirit, Virgin America largely operates to legacy strongholds, attempting to lure passengers away from network carriers with its highly-regarded in-flight experience. Although the carrier continues to rack up numerous awards for its service, the business case has yet to be proven.

Spirit Airlines marks milestone with Dallas-Toluca flights

Spirit Airlines will mark a milestone in Jun-2012 when it introduces flights from its growing base at Dallas Fort Worth International Airport to Toluca, Mexico. Currently most of Spirit’s international flying is operated from its Fort Lauderdale headquarters, as part of a strategy the carrier adopted during the middle of the last decade to build the airport as an alternative gateway to Miami for service to Latin America and the Caribbean.

Part of Spirit’s tactics included offering lower fares to those destinations than American Airlines, which remains the dominant carrier in Miami. Spirit for many years had a singular focus on penetrating central America, northern Latin America and the Caribbean to capture the significant volumes of visiting, friends and relatives traffic (VFR) that transited to southern Florida, and now offers flights to roughly 25 international destinations from Fort Lauderdale. It adopted a no-frills model that allowed it to offer appealing low fares to that passenger segment and co-exist with American in the Miami metropolitan market.

US carriers push for national airline policy as red tape, tax burdens threaten to crush their plans

Costly new regulations imposed by the US government designed to protect consumers and a spate of looming new taxes have galvanised the country’s airlines to launch a full-scale campaign to communicate the urgency surrounding the need to create a national airline policy. The stakes are incredibly high as some of the proposed taxes could hike the industry’s costs by USD36 billion over the next decade, and the heavy hand of government regulation ushers in new rules that could also add billions of dollars in compliance expenses for US carriers that are working tirelessly to prove their nascent profitability has staying power.

US industry trade group Airlines For America (A4A) started its campaign to convince government of the necessity for a national airline policy in late 2011 as the administration of US President Barack Obama proposed a USD100 tax on every flight and a tripling of the security taxes over a five year period.

Spirit goes to new lengths to press its case for Venezuela

Spirit Airlines’ quest to attain long-coveted service to Venezuela took an interesting turn when the carrier seized on an opportunity to criticise the Venezuelan Government for foot-dragging on its authorisation to serve the country through a routine renewal of US-Venezuela authority for small cargo charter carrier Sundance Air Venezuela. Spirit appears to be seizing on any opportunity to highlight the Venezuelan Government’s slow approval process for its flights to the country.

Spirit Airlines broadens its focus to both legacy entrenchments and classic niche markets

Spirit Airlines executives have concluded consolidation in the US has created a prime opportunity for its ultra low-cost business model to allow the carrier to invade legacy strongholds like Dallas Fort Worth and introduce limited flights that will allow Spirit to grow the market with lower fares instead of poaching passengers and creating a structural shift in the competitive landscape. At the same time, Spirit is also developing its more typical niche markets to round out a network focus dominated by domestic growth during the past couple of years.

Spirit has turned its attention away from growing Caribbean and Central America services from its Fort Lauderdale hub to capitalise on some of the 300 non-stop markets between Canada and the northern region of South America that have more than 200 passengers per day each way. These markets, like northern New York state airports close to Canadian cities, can support the 18% annual seat growth Spirit aims to achieve through 2015.

Spirit earns USD50 million in successful bag policy

In Aug-2010, Spirit raised industry interest and Congressional hackles by announcing it was imposing a carry-on bag fee as part of an effort to speed boarding and deplaning. It remains the only airline to have such a fee and it is setting a new standard for fees in the US airline industry.

The airline, which generates about 30% of revenues from ancillaries, not only made the fee stick but earned USD50 million from the effort. In a hearing last spring, Louisiana Senator Mary Landrieu was so furious that she would not let CEO Ben Baldanza get a word in edgewise to counter her charges that his airline was a consumer rip off. Given the 25% increase in passengers after the fee was imposed, apparently passengers do not agree.