What happened?
 

Can someone explain to me how Spirit got here with the speculation of bankruptcy? 10 years ago it had pretty much the highest profit margin in the industry. The fares really were never that cheap compared to everyone else after fees, just like now.

The plane issues, I'd imagine lost revenue is covered 100% by manufacturer.

Attrition, always had it, but hiring was always able to keep up with attrition, like now.

I always thought the Jetblue merger was because JetBlue needed Spirit to grow in order to compete and not that Spirit needed JetBlue to survive.

Why is Spirit all of sudden in apparently bad shape? I don't get it, what has changed?

It seems like after this contract round everyone else have had. Spirit ought to have a massive cost advantage. What made Spirit all of a sudden not work while others are returning to massive profitability.

1. Pratt is paying leases on down airplane. They are not paying for lost revenue. Spirit will have to sue them for it. That’s a big hit.

2. You are right about the initial reason for the merger.

In the interim when spirit thought they would become profitable post Covid the engine issues started and demand for the ULCC product went in the toilet. Passengers do not want what we are selling. Those that do can find select “basic” seats on legacy airlines and not deal with the trashy ULCC airlines. Also big four have predated on Spirit by adding capacity at a loss on our routes to squeeze us. I’m years past they didn’t have the resources to do that. They do now and are doing it. The exact reason for the merger, be able to compete with the big 4. Right now they can just put anyone out of business that becomes a threat.

Perhaps a little bit of everything?

Covid somehow seems to have reshuffled the deck. Where the little guys had real good balance sheets going into Covid, the big guys after being kept afloat came out stronger.

The legacies adding in pricing tiers (basic economy or whatever you want to call it) that mimicked Spirit pricing to better compete.

An economy that has been hurting the poorer people in the country via inflation.

Engine issues.

What happened?

The industry changed.
10 years ago all the big boys had highcosts and high fares. Now those costs are gone and they started their basic economy fares. Any edge the LCCs had is now gone and they have the same costs and fares as the bigboys but without any of the extra rev.

I think your economy statement is correct. Most Spirit passengers were the people living paycheck to paycheck. Inflation has decimated them and the Spirit model. The richer passengers have not shifted to Spirit as predicted.

Hmm lets see, just flying as a pax for the last 2 years: Customer service down the ****ter (just look at philly.. what a dump), fares matched by everyone else and the biggest kicker for me is the absolutely terrible pairings and frequencies. With that being said, the Spirit big seats up front are the best bang for the buck in the industry.

I’m not sure Spirit has made an annual profit since 2019. Whatever changed started a while back. There’s a decent chat about it in this podcast.

https://podcasts.apple.com/us/podcas...=1000641925767

Not even just the big guys. Even jetblue came out with "basic" seats. the ULCCs should have seen that comming, such a simple thing and whamo , the other airlines have their own little internal ULCC on every flight to undercut.

Spirit has been suffering from the Pratt engine issues since they first got them. The motors have been a disaster for them.

I remember seeing bunches of brand new Spirit NEOS sitting with no engines on them in DFW 4 or 5 years ago. Two totally separate issues btw. Currently they have 40 planes grounded! That's brutal to the bottom line.

I don't think Spirit is going out of business though. They have a lot of cash on hand right now. If they do decide to try a trip thru chapter 11 they will come out the other side. Now, they could certainly get bought out in Chapter 11, but the planes will keep flying. At least the ones that have friggin engines on them.

The posts above regarding the economy are mostly correct. Lots of people just haven't felt the pinch that makes them look for cheaper alternatives yet. It's coming though. People are still spending like we just got out of covid lockdowns. It's pretty amazing actually. Credit card debt is at an all time high, car loans, mortgage payments, etc are all at all time highs. People are dropping money like there's no tomorrow, and that hasn't been good to the low cost airlines.

The economy and people's spending habits are constantly shifting and right now the ulccs have found themselves in an oddly difficult spot. The one thing I don't really agree with that's been said above is touting the success of the basic economy tix at the big airlines. I don't think that's as big a success as some. I think most people are still paying for high dollar tickets.

I have been a firm believer in the ulcc business model and I continue to be. The most surprising thing to me lately has been the financial success of the legacies the last 2 years. They just keep raking it in. But it can't last forever and when travel demand and people willing to pay $750 fur a round trip domestic ticket wane, they will be stuck with their super high cost structure.

Also, for the younger, newer crowd; don't ever forget that this is a brutally hard industry. The history of airline bankrupbankruptcies, furloughs, pay cuts, etc is a long and rich one.


Edit: I thought this thread was in the Frontier subsection. My bad. I thought I was writing to the Frontier pilot group. Sorry if this sounded weird

Legacy ticket price isn’t too much higher than the LCC’s. Sure what route and timing do factor in to pricing. But on average when you have to pay for a checked bag and buy onboard items, the pricing comes out near what it would have to be all inclusive on a legacy.

bad press too. When people see gate agents getting beat up and fights on board, they automatically think of spirit.

This is the problem. Once ULCCs get to a certain scale, they actually have to absorb more costs. They have to pay more gate agents, rampers, maintenance, etc. Also, the worker groups have demanded more money. Spirit pilots make signfinicantly more than they did pre-Covid. They had serious trouble getting rampers and gate agents, after Covid and had to raise the prices there. When you fly once per day, you can get away with a peacemeal operation, but once you start getting lots of frequency, you have to build out infrastructure and fixed costs.

The biggest issue with Spirit, according to their SEC filings, is the lack of demand.

Q2: "However, demand for the peak summer travel period has been softer than expected, resulting in lower fare levels on the routes we serve. This summer we are comparing to a period of exceptionally strong domestic and near-field international demand in 2022, while at the same time seeing demand shift away from these regions towards long-haul international. Difficult weather and challenging Air Traffic Control initiatives are also creating a significant headwind to unit revenue.

These trends continued throughout July and we are assuming they will continue into the fall. However, once the international summer travel season ends and kids go back to school, we anticipate that demand will shift back towards domestic. This should mean a more normal pricing and demand environment for the peak holiday travel periods in the fourth quarter."

Q3: “Softer demand for our product and discounted fares in our markets led to a disappointing outcome for the third quarter 2023. We continue to see discounted fares for travel booked through the pre-Thanksgiving period. And, unfortunately, we have not seen the anticipated return to a normal demand and pricing environment for the peak holiday periods. Given these continued trends, we are evaluating our growth profile and our competitive position. We have already taken the first steps by modifying the cadence of our aircraft deliveries through the end of the decade and slowing our capacity growth in the near term. We continue to believe merging with JetBlue and creating a viable competitor to the Big Four US airlines is in the best interest of consumers, Team Members, and shareholders. We are prepared to make the necessary strategic shifts to enable Spirit to compete effectively in this new demand backdrop,”

I think your point is part of the problem. People are trying to make it like a legacy traveling experience. It’s not and it’s not intended to be. I don’t care about the bag of pretzels and a coke. I don’t care about the inflight entertainment. I don’t care about the wifi. I don’t care about the seat back charging. I usually don’t care what seat I get. I can read and measure a bag size limit. So for me a ULCC pricing structure is much more preferred.

To me the bigger problem is the psychology of the American ULCC experience right now. It feels like a gotcha on many of the fees. Instead it should start from the moment you purchase a ticket to feel like a game on how much you can save while still spending the money.

“Want a seat?”
”No.”
”BAM you just SAVED $25 each way! If you change your mind later no problem but for now that seat is FREE!….Check that bag instead of carrying it on and SAVE another $5!”

Flying for cheap should feel like winning a contest.

At the end of the day ULCC is a business model that’s based on filling as many seats as possible. Without fees, it has to be full. Why pay spirit fees when you can go to the big 4 for similar prices. In order to survive, they’re going to have to restructure their costs and they might have to rebrand. The spirit name is synonymous with passenger brawls and a cheap greyhound experience.

It’s not. I just described…oh forget it.

They also have to have high utilization per day. Having an asset in revenue service for 18 hours a day is 50% more than having one in service for 12 hours a day.

Few years ago Spirit “bought” their D0 numbers by lowering utilization and not driving turn and burn so hard. Before that they were maxing fleet utilization by selling unrealistic schedules and just taking the tardy’s. It is sort of unproven if Spirt can maintain a respectable D0, and have the utilization to maintain a profit.

The tacked on legs that Southwest has and that forces mostly AM or PM trips is what helps their utilization and profitability so much.

The big 3 can add a hub bank, or delete one and stretch the sits to cover the larger footprints of an available “travel day” and help poach the early/late travelers that are suppose to be utilization gravy profit.

They do? then why the aircraft sale/leaseback announcement the other day?

I believe they have roughly 1 B in cash on hand

I think they lost .5B this year alone. Not a ton of ramp left at the burn they are at. Id say they could last 2 years if they did nothing..maybe longer with the engine payments coming from Pratt...but long term profitability as a stand alone carrier will involve some major changes.

I dont think we are getting away from the alacarte, ancilliary rev model. We may offer different bundles and add more BFS in order to offere diffrent bundles. We have a strong presence in Florida and Vegas, which are two attractive markets and have grown a nationwide base structure to support it. I can see a doubling down on ultra low fares, ultra basic economy to vactation desitinations while also offereing compelling bundles, like a no-worries ticket - gets a big seat and checked bag or two carry ons, a tiered system like all the other airlines have..Wanna-get-away etc, etc.

I have no idea how they spin this PR-wise but it will require some advertising dollars and I am hoping the can leverage the current news buzz or the next large stock change to also capture positive PR, but I think that will help compete just as much as low fares will. A positive image helps more than people imagine.

Maybe there could be a company-sponsored contest for the most epic brawl on a Spirit flight or at a Spirit gate.

Top 10 submissions get a free bag check on a future Spirit flight!*

*void if you were added to the federal no-fly or banned from the airport list as a result of the brawl.

Meh this shtick is overdone. I've seen more BS at American gates than Spirits.

Holding cash is expensive and unproductive. When your income is secure you always deploy it to earn a yield.

Building a war chest is literally a term for preparing for the worst.

I had a laugh when I saw this video, but it truly speaks to the image problem Spirit Airlines has.

It's reached pop culture status:
https://www.youtube.com/watch?v=
IZf0bNDWH4s

Even in a SNL video making fun of Alaska Air, they end it with a dig on Spirit!

Kinda ridiculous with the Spirit dig. If only SNL knew United pilots bend metal while landing on the regular , and Delta pilots pull hand guns on one another. The whole pistol to the head thing would make for a funny skit.

People like saving money. Legacies are offering economy plus fares cheaper than spirit can offer. That's it. The legacies now offer the spirit model, but with a better network. All goes back to covid. Legacies had to adapt because there was no international travel and no business travel. Until business travel comes back, if it ever does, legacies will crush smaller foes through their size and flexibility.

The merger should have been approved. Legacies offer a better and cheaper bare bone product than spirit. Why is the government putting the burden on a small, failing company to drive prices? That's just crazy.

Why is the government putting the burden on a small, failing company to drive prices? That's just crazy.

That statement right there sums it up perfectly.

Hello Spirit, there’s your argument

not sure that's how it happened

https://apnews.com/article/pilot-gun...514da3511934bf

ok, so both pilots are ridiculous that a medical turned into a spectacle worthy of….what it’s become. It’s a public legal matter that should be lampooned on SNL.

I agree and they run should run hard with it because it's funny

Because the legacies only offer those fares to compete with the ULCCs. No ULCC = no basement legacy fare. It's almost like the sword has 2 edges...

This is why Spirit will apply for and receive a bail out to avoid chapter 11 if all mergers are prohibited.

I don’t think this is that crazy of a theory. Government subsidized air service is already a thing (EAS) and maybe we see that authority expanded to cover low fare tickets. I’m sure legacies could get behind that as well if they could get $x/seat under a certain price.

what is this, North Korea?

the last thing we want is that level of centralized government meddling. Any such program would be an absolute disaster for this career. The more the government gets involved, the more they’ll dick it up.

The first thing they’d try to do in that scenario is lower pilot pay. The public won’t care about a bunch of rich dudes getting a haircut, and the government won’t care what the long term ramifications are.

The government meddles/subsidizes all sorts of stuff. Ever heard of green energy?

you really couldn't have proved my point any better.

gotta run. Off to buy some carbon offsets.

They could, but it’s not proven if Spirt can even exist in an inflationary environment.

Recession proof and inflation proof may not be interchangeable.

Possible Spirt gets past P&W and makes money, also possible they only have a market if the country can run 10 years on <2% inflation.

Low inflation has lasted so long it is baked into Spirits very existence.

Through the United/Southwest app I presume?

Uncle Sam has been handing out a $30 credit to poor people who have high speed internet that already only cost $10 a month because they are poor.

They get paid $20 a month to have internet. Dems pushed for it in that infrastructure deal, and are pushing to extended it.

It is not actually loony tunes anymore that SNAP or Medicaid recipients get a refundable credit to fly Spirit.

This is what I’m ultimately getting at; the federal government is ruling cheap tickets have to be protected. Cheap tickets existing will be enforced one way or the other. It’s equitable that all people have the ability to fly cheaply. Heck, you may have to prove financial status to qualify for said cheap tickets.