Found an interesting post on Reddit:
Pricing analyst working for spirit currently — we base a lot of our pricing decisions on competitor prices and ensuring we have a decent gap with legacy airlines. People won’t book with us if they could fly UA or delta for only $30 more and they’ll have a checked bag and carry on for free. Also we do our best to match or undercut frontier in markets we overlap with them which can cause price wars and lower profit for both players.
Honestly I just don’t think the average spirit customer would be willing to pay more when they would also have to pay for ancillaries like carry ons and choosing their seat, when they can just get that bundled at a more premium airline for not that much more