I know that a lot of people love to hate Spirit, but I’m not one of those people. That airline has made its model very clear. You’ll get a very low base fare but just about everything else will cost extra, including carry-on bags that don’t fit under your seat. If 
you don’t like it, you don’t have to fly on Spirit. But it’s a perfectly good model, and customers have responded. The airline is making money.
This past week, the airline announced some big moves. It will begin flying from Chicago/O’Hare to Boston, Dallas/Ft Worth, Detroit, New York/LaGuardia, and Orlando. You’ll also see flights from Vegas to Portland (OR), Oakland, and San Diego. These are big moves in big airports, and I was able to get Spirit’s Chief Marking Officer Barry Biffle on the phone to learn more about it. We ended up having a wide-ranging discussion, so it’s going to be broken into two parts. Today we’ll talk about the new markets. Tomorrow, look for talk about fees and why Spirit loves them so much.
Cranky: Where is all this capacity coming from for these new routes?
Barry: There are two more aircraft coming in at the end of this year and three more at the beginning of next year. There’s not a lot of frequency on these routes, so they don’t actually use a lot of aircraft. You can take San Diego to Las Vegas for example. It’s only an hour flight. We operate our airplanes 13 hours a day, so that’s a small amount of time for a roundtrip.
Cranky: Tell me more about this move. You’ve really focused on Caribbean and Latin America for awhile. Recently you’ve gone into small cities like Plattsburgh (NY) and Latrobe (PA). Now you’re doing big city routes.
Barry: The geography may be a little different, but it’s 100 percent consistent with the business model. What we look to do is provide something different in the marketplace; we are the price leader. We look for markets that have really high cost competitors, we look for really high fares, and we look for cities where we can we have an efficient operation. Then the question is: Will the market stimulate if we come in?
Cranky: But O’Hare is crowded and not the cheapest airport around, so can you have an efficient, low cost operation?
Barry: Specifically in Chicago, we’ve been there for a long time and we’ve been growing Chicago in just the last year and a half. We see the dynamics of the customer base in Chicago wanting more and more of what we offer. The fare environment has gotten really high. American and United have a great product and they’re serving the business customer needs very well but the reality is that $400 for a two-hour flight to Dallas is out of reach for leisure consumers and people visiting friends and relatives. So we saw a great opportunity there.
Las Vegas also meets those same criteria, and when you talk about the stimulation potential, Las Vegas is one of the greatest destinations on the planet. At the end of the day, it comes down to price. You have a lot of markets out there that are one- to two-hour flights that are over $100 on average. The only reason people go there is vacation or leisure, setting aside convention business. The price is gonna draw a lot of people in. Vegas is also important because the seasonal balancing opportunities are very good and it complements Ft Lauderdale. In Sept/Oct, which are decent convention months in Vegas, it’s hurricane season [in Florida]. Conversely, not a lot of people go to Vegas for Christmas.
Cranky: I understand the rationale for targeting these markets in general, but why O’Hare? If you are all about lowest costs and lowest fares, why not something like Gary or Rockford which is cheaper?
Barry: We’ve looked at Gary. We’ve looked at it a lot. It’s cheap. And we looked at Rockford. The best way to think about our airport selection is we will go where we believe we will have a cost advantage. We will not fly somewhere if we believe that the airport location is going to impede our cost structure. We fly to LaGuardia and we believe we’re the lowest cost operator there. We run 12 flights a day on one gate. We wouldn’t be in LaGuardia if I couldn’t find a way to be the lowest cost operator at the airport.
We’re already in O’Hare and by throwing out two gates of flying, we’re actually lowering our costs there. Our first choice is always going to be a secondary airport because of congestion and at the end of the day, the facility’s cheaper. But the reality is that there may not be a good secondary option. In Europe, it’s actually great, because there’s so much ground transportation. In the States, unfortunately, so many people have cars, but they don’t want to necessarily drive them that far.
Cranky: So you’re saying people don’t want to drive to Gary or Rockford for low fares?
Barry: Specifically with Chicago, my opinion is that if you’re going there for business, Midway is just as convenient to downtown or easier than O’Hare. In our case, we’re not targeting business traffic, so I don’t look at it that way. If you think about the geography where the population lives, specifically the suburban population, it’s north and west of downtown. So O’Hare is much more convenient than Midway. If you look at Gary, there’s just not that much population, and definitely not the affluent population on the south side, south and east of Chicago.
I actually think we’re still intrigued with Gary and I would actually argue that Gary serves a different geographic base. Rockford is a little bit different. You do kind of appeal to some of that west and northern suburbs and of course, I guess Allegiant has chosen that. Our view is that I’m already at O’Hare so we want to grow O’Hare to its potential before I consider another airport.
Tomorrow, we’ll talk fees. I can already hear you guys typing your comments, so I look forward to a “Spirit-ed” discussion. (Sorry for the pun, but I had to do it.)
19 comments on “Spirit’s Marketing Boss Talks About Big Moves In Chicago and Vegas (Across the Aisle Interview, Part I)”
I agree with what he said about Chicago. We were having the same discussion a while back, saying that the money and affluent suburbs are in the north and west of the city.
While I don’t agree with a carry-on fee, Spirit has made it clear. I would prefer (from a legacy at least) a choice of either a carry on or check in bag free. (The trade off being more stuff or more convenience).
Its interesting that they’re going after the affluent suburbs — I mean they’ve got the money, but their product isn’t exactly what I’d guess those folks would like.
Affluent in the Midwest tends to different than affluent elsewhere. I don’t know where it comes from but the ‘Midwestern Sensibility’ thing is absolutely true.
Most of the leisure fliers I know don’t take anything more expensive than WN. Doesn’t matter how much they make or have in the bank, if they aren’t flying enough to be elite or using CC rewards they try to stick with a LCC.
Not to mention that most people who live closer to Gary than O’hare are not making enough money to fly somewhere every year.
“More Expensive than WN.” So you mean they’ll fly any airline’s coach seat? Since WN often is the most expensive now adays..
You know I couldn’t say. I don’t live there anymore but I’d be willing to bet it’s still surprisingly popular if only because it has a more straightforward product. However I feel like that would apply almost anywhere when you fly domestically and is not a Chicago/Midwest thing so who knows?
Sounds like he’s knowledgeable about the industry, he understand’s Spirit’s business model, and that they’ve done their market research.
I’d certainly hope that guy understood his company’s business model.
Aircraft coming at the end of the year and next year mean nothing since the new service starts before that, so some markets are going to get less flights per weeks so those aircraft can be used elsewhere.
When I heard about Oakland, Portland, and San Diego with only Las Vegas service, I just assumed they were only added since the aircraft would be in the west and there was slack time before they needed to be used to head back east due the time difference. Since they were already doing LAX-LAS a quick flight LAS-SAN-LAS keeps the aircraft busy instead of sitting around for a couple of hours.
But with close markets to/from Vegas Californian’s travel there a lot and cheap is a big draw. Besides, you can always win your ticket price and fees back on the slot machines right!
So I had to make some cuts in order to get this interview down to manageable length, but what’s really happening is a normal pulldown of Florida/Caribbean flights during the off-peak fall season. That lets them start these other markets before the new planes arrive, but then the new airplanes coming in will let them ramp back up during the peak in the Florida/Caribbean markets.
I see, so its similar to Icelandair leasing half its planes in the winter.
What have they been doing in the off-season so far? I’m sure some of their DTW markets like LGA can go year-round.
Well they have some other smaller markets that they’ve used for off season service. You’re right about places like Detroit to NYC, but even their budding Myrtle Beach base has some seasonal offset compared to Florida. (At least, that’s what they say.)
If an new airline wants to do well in this environment, it has to be different or fill in a niche of some sort. Spirit appears to be doing that. So is Allegiant.
With the Legacy (and I include Southwest in that category) segment of the industry consolidating as it has been (and most likely will continue to) the only new opportunities will be niche or spin-off carriers that can more economically serve certain markets.
JetBlue has taken advantage of American, Delta, and US Airways’ relatively high costs in New York and Boston. Alaska has a geographic niche. Spirit and Allegiant target a price sensitive leisure traveler who isn’t time sensitive, etc. I have little doubt many of Spirit and Allegiant’s customers compare overall fares and find them to be less expensive even with the various fees, but that topic is tomorrow’s.
I found this on their website.
“Spirit Airlines has announced an innovative approach to ensure transparency in fuel costs, making sure you as our customer know how much of your fare is fuel cost. You will now have this important information available to make smart travel decisions.”
Exactly what decision does that help me make?
How much to hate the airline for the price of your ticket versus the oil companies
Better than other airlines (Air Canada) where your fuel surcharge can easily exceed the fuel cost/ASM.
I thought for LAS they would just use an aircraft to zip back and forth between California and LAS, but I just checked now that the three OAK-LAS flights are showing in fall, and I was surprised to see two of the OAK-LAS flights will continue to ORD and one of those will go on to BOS. They will do the same in reverse, so it shows they are wanting to move people about the country and not just do some small point to points.
They will compete with nonstops on WN between OAK and MDW, so this should be interesting to see which people chose, nonstops with higher fares on WN, 1-stops on NK with lower fares but fees or hop over to SFO (which isn’t hard to do) and fly UA/AA SFO-ORD nonstop which have lower fares then WN OAK-MDW or SFO-MDW.
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The fees are one thing. My problem with Spirit is their tasteless advertising.
Yep, but that tasteless advertising has you and many others talking about an otherwise little-known 35 aircraft operator that in years past has bumbled around with no idea how to get noticed. It might be off-color, but it’s brilliant marketing. By the way, how is network TV (especially Letterman, Conan, etc.) any “cleaner” than Spirit’s advertising spoofs?