The Pros and Cons of American Airlines’s New First Class and Business Class – Conde Nast Daily Traveler
Just a little piece on American’s new 777 interiors. Not much more than what I wrote about here.

Waiting to board with Brett Snyder – Cheapflights.com Waiting to Board
I did an interview with Cheapflights talking about the blog and some travel tips.

Spirit Grows Dallas/Ft Worth
Spirit has has now refocused on domestic flying, and DFW is getting a big new spot on the map. This expansion will see one flight per day to Atlanta, Boston, New York/La Guardia, and Orlando. It also announced a day later that it was going to add a daily flight to Mesa (outside of Phoenix) as well.

Let’s be clear on this one: this doesn’t hurt American much. Sure, it has the potential to siphon off some seriously price sensitive travelers on to Spirit, but American shouldn’t be targeting those people anyway. The flight times here aren’t very good with a redeye on the DFW-Boston and Mesa-DFW flights and some mid-day runs on the others. This isn’t going to pull off business travelers in any way, and I can’t imagine Spirit wants to do that. Just as it has tried to do in Chicago and in Vegas, Spirit sees an opportunity to go with super low fares and skim traffic off the bottom.

For Spirit, the timing was perfect. Spirit thrives on using outrageous slogans or promos to get free press. So when Spirit saw American file for Chapter 11 bankruptcy protection, it was too good to ignore. The press release makes that clear with references to a “new chapter in Dallas/Fort Worth’s history” along with $11 fares. You have to love an opportunistic airline. Spirit is like a parasite that lives off the misfortune of others – it’s brilliant.

This really shouldn’t be viewed as much of an assault on American, but many will draw the parallel. And American, like most legacy airlines, has nothing against irrational response so we’ll see where this goes. But American isn’t the only one that’s thinking about these moves. . . .

JetBlue Starts Boston to DFW
Another move that would seem to be more alarming to American is JetBlue’s decision to fly Boston to DFW three times daily. JetBlue has avoided DFW so far, and it has a strong relationship with American, so this might seem curious. Why is JetBlue doing this? I think it’s more about Spirit than American.

Is JetBlue trying to make a move on American’s turf? Well, it is doing that, but I don’t think it’s particularly targeting American. JetBlue stands to benefit through greater cooperation with American after the bankruptcy process wraps up, and it wants to be a strong partner. That makes this seem like an odd move.

And that’s why I think this is more about Spirit. JetBlue has previously been VERY aggressive at tackling ultra low cost carriers. When Allegiant announced it would begin flying from Long Beach to Las Vegas, JetBlue ramped up to offer 5 daily flights in the market and launched the additional flights with a $19 each way sale. Overkill? Yeah, probably. But then again, Allegiant pulled out.

JetBlue has tried a similar move with Spirit. Less than a week after Spirit announced it would do a daily flight from Chicago to Boston, JetBlue added a fourth flight on that route. While JetBlue doesn’t care about competing on Boston to Myrtle Beach and it probably accepts Spirit flying to its home base in Ft Lauderdale, it’s not going to be willing to sit there while Spirit moves in on other destinations. That’s why I think we’re seeing this move.

Delta Steals Gol from American
In a completely unrelated blow to American, Delta signed an “exclusive” deal with Brazil’s Gol to be the only US partner with the airline. That means that American’s current partnership with the airline is going to disappear. Delta paid a pretty hefty price to get in on this – it had to invest $100 million in Gol and now has a seat on the Board of Directors.

While I can’t imagine this has anything to do with American’s bankruptcy (this kind of agreement had to be be in the works long before), I do think it was more about Delta feeling a little desperate about Latin America. Avianca/TACA and COPA will all be in Star Alliance. Though I don’t think it’s been announced, the combined LAN and TAM have to pick an alliance, and the scuttlebutt is that they’re leaning toward oneworld (as they should). That leaves Delta with a messy Aerolineas Argentinas and absolutely no presence in the increasingly important Brazilian market. This was an effort to buy a place in that market, and it’s a place that American likely won’t need assuming LAN brings TAM into oneworld.

So, lots of moves that impact American recently, but it’s not a direct hit, as the title of this post says.

[Original surfer photo via Flickr user The Pug Father/CC 2.0]

Buying the Tickets
My first decision was to pick the day to go. I of course looked for the cheap days and the days where the flight times worked. Spirit keeps a fairly consistent schedule but Allegiant is all over the map. The morning flight on Wednesdays looked best, because it would give me 3 hours in Vegas to connect. I knew I needed a buffer in case Allegiant was delayed (and it was).

I first went to AllegiantAir.com to buy my ticket. The website is a bit clunky but I found my flight on November 2 for $10.01. I declined the myriad of seat assignment fees, bag fees, car rentals, hotels, etc before finally getting to the final screen. My ticket had still ballooned from $10 to over $50. Why?

Allegiant slaps on a “convenience” fee of $17 per ticket if you book online. The airline also snuck a transfer in on the website which I would have had to de-select. Knowing that I would be running by Long Beach Airport, I figured I’d just drop in and save the $17.

Tickets can be bought within an hour after every flight departure, but finding out when each flight departs wasn’t easy. I did figure it out, and it took me only 10 minutes to get ticketed so I was able to avoid a parking fee at the airport. Total ticket price was $20.71 with a mere $9.31 going to Allegiant and the rest to the feds.

With Spirit, I wasn’t so lucky. I went on the website and got the same kind of experience as Allegiant though the fees were displayed more clearly and the site looked more professional. On Spirit, there’s an $8.99 passenger usage fee each way, and I wasn’t about to drive up to LAX just to avoid that. I gave in and paid $28.69 for the trip with $8.37 going to Spirit for the fare plus $8.99 for the passenger usage fee. That was the only fee I’d pay on the whole trip.

Checking In
The day before departure, I went to check in for both flights. Allegiant just gave me an error message saying that since I hadn’t paid for an assigned seat, I couldn’t check in online. If I wanted to pay for a seat, I could call Allegiant. I knew that was the case, but this was very poor presentation. Why not let me pay right there? (Not that I was going to . . .)

Spirit does things differently. When you check in, they try to upsell you more on bags, seats, etc. If you pass, then they just assign you a random seat, which is, of course, a middle. I ended up in seat 19B, printed my boarding pass, and I was set with them.

When I bought my Allegiant ticket, the people at the counter said it was a madhouse and people usually really did need to arrive 2 hours before departure. But they said that the Wednesday morning flight was lighter so I could get there 1.5 hours early and I’d be fine.

I parked on a side street off the airport and walked the 10 minutes into the terminal. Once there, I found nobody waiting at the Allegiant counter. I checked in and the first thing the agent said was that the flight was delayed “about 30 minutes.” Had Allegiant actually offered flight status on its website, I would have known this when I checked. Unfortunately, it just redirects to you FlightView and has no delay info. Boo. She then said the airplane was only half full so I’d have an easy time picking an open seat. I got my boarding pass, which was Z17 and went to wait at the gate.

The Flights
There is no Allegiant presence in the gate area – they just board from the Delta gate. When the airplane finally arrived, they started boarding and there was some confusion. First they did some pre-boarding for those who paid. Then they board those who paid for assigned seats (about 15 boarded). After that, they boarded families and then open seating in groups of 10.

I did the long walk to the airplane and saw it in shiny new paint. What a beauty, especially with the iconic Fly DC Jets sign in the background. I figured this might be the last chance I’d have to fly a Douglas aircraft out of its Long Beach home.

The interior was clean but the fixtures looked old. I loved it. Nobody seemed to be in a hurry and in the end, we left about an hour late. The Santa Ana winds were kicking up so I had the chance to experience my first departure from runway 12.

As you can see in the video, we took off like a rocket, and circled over Long Beach before heading toward Vegas. Being in the front of the airplane, I could hear nothing but the slipstream. I love that airplane. It’s so funny, because were I stuck sitting in the back next to the engine, I would have a very different opinion.

The flight was quick as we went by Disneyland and Ontario Airport. By the time we had passed over the Cajon Pass, the flight attendants had already done their beverage-only service. Sticking with my no-fee plan, I passed. Soon we were descending over the desert, and we landed straight in to the north.

I got off the airplane and noticed that half of the D concourse we were using was fenced off. I took the train back to the main terminal and went through security at the B gates, where Spirit flew out of. This time, I opted for the Millimeter Wave scan instead of opting out, and they really have sped the process up dramatically. It was quite efficient.

By now, I had about 1.5 hours until my flight back, so I wandered. I strolled down the A concourse where Spirit uses a couple gates and US Airways uses a couple more. One whole part of it is fenced off and it’s really quite empty. (And THIS is an airport that’s building another terminal. Yeah, that’s a good idea.)

I went back to the B gates and found my airplane waiting there in the old black cube colors. I went up to the gate and asked if I could change my seat or if that would cost money. The agent laughed and said that no, he could change my seat at the gate without charge.

He asked if I wanted an exit row, and I stared at him wondering what the catch was. He said that it was again no charge at the gate – first come first served. And since the flight was less than half full, there wasn’t much demand.

I parked myself in the empty gate area and waited until it was time to board. Spirit has a much more normal boarding process, using zones. They boarded zone 1 and 2 but apparently, that’s only for exit rows and people sitting in the Big Front Seats. Only three of us boarded.

The first thing I noticed was the advertising on the bulkhead, on the overhead bins, on the seatbacks…. It didn’t bother me , but the advertisers are certainly getting their money’s worth.

I took my exit row seat and found it to be horribly uncomfortable. The seat lacked padding, as exit rows often do, and it felt like it was reclined forward. I moved up a couple rows to a standard row and found the seat pitch tight but it was for more comfortable. Certainly nothing that would bother me on a short flight like this.

But I couldn’t stay long. The flight attendant said that everyone had to sit in their assigned seats for weight and balance. Really? Ok, so I went back to my generous exit row legroom. I did notice that the seats were very well worn and there was a lot of junk in the seatback pockets, but it was just fine.

Soon, we were pushing back to take off, but then we sat. Other airplanes passed us to depart, so I assumed there was some sort of flow control delay into LA. The pilots never said anything and after about a 10 minute wait, we were on our way.

We had barely made the turn back toward LA after our westbound departure before the flight attendants started pitching the Spirit credit card. That was followed by a pass through the aisles asking if anyone wanted “purchased items.” Then they came back through and handed out credit card apps. Believe it or not, people actually took them.

Unlike on the Allegiant flight up, the Spirit pilots turned the seatbelt sign off quickly. As soon as they did, I headed back up a couple rows to the more comfortable seat.

After the early quick passes, the flight attendants went back to the galley while travelers slept or read. I just stared out the window as we headed toward LA.

It was an uneventful landing and we pulled in to our gate in the war zone known as Terminal 6 a few minutes early. Terminal 6 is under massive construction preparing for the Alaska move next year, and it’s a mess right now. My wife picked me up at the curb and we headed back down to Long Beach.

The Verdict
Both of these airlines gave great value for the money, and that’s no surprise. I mean, if you pay $48 roundtrip, it’s hard to get poor value as long as the flights get you there. Most of the things that bugged me could easily have been resolved by paying for an extra level of service. And that’s great. I’m more than happy to have the choice to pay for what I want. So, who was better?

While I loved the MD-80 ride on Allegiant, I have to give the nod to Spirit for being more polished. Spirit seemed to be more clear about the model throughout the entire process. The website was pretty easy to use and the nature of the product was very clear throughout the process. My biggest complaint about Allegiant is really on the operational side.

Allegiant has no flight status on its website so it’s impossible to know for sure if your flight is delayed unless you just look for an inbound flight on a flight tracking service. There’s no reason they have to be so difficult with those kinds of things. I also found Allegiant’s boarding process to be pretty confusing with some assigned seats and some open seating. The whole process just ran more smoothly on Spirit.

But in the end, both did a good job.

[See more photos from the trip]

Cranky: Now what about Vegas? People have long thought of Southwest as the low fare airline, and you’re coming into Vegas-West markets where Southwest has long ruled the roost. But you think that Southwest’s fares have risen to the point where there’s room for a lower fare operator?

Barry: Well, we added LA last month. You’ve still got Delta, US Airways, American, and United. There are plenty of high cost guys. But we do have lower costs than Southwest. We also offer a different product. Southwest would actually go out and tell you that everything is free. They tell you bags are free, but what they really ought to say is that you’re subsidizing people who want to check bags. It’s like when you go out to dinner with friends and someone orders a really expensive bottle of wine. When you split the bill, you’re paying for it whether you drank the wine or not.

In 2006 our total revenue per passenger was $109. We actually had less than $5 in non-ticket revenue. In 2010, our average total prce including options was $112. It was only up $3 but our non-ticket revenue was $35. We don’t nickel and dime. What we’ve done is allowed people options. Most people are figuring out that we’re a much more consumer-friendly model. But we also cater to a different clientele. If you’re the guy who always orders that wine, you like the Southwest model.

Cranky: Let’s talk about one of the more controversial moves. You’ve started charging for people to bring carry-on bags.

Barry: We were averaging 17 gate-checked bags per departure at LaGuardia. The reason is because airlines lie to you, not Spirit, well, they don’t really lie but they’re allowing you two bags when there isn’t enough space above all the seats for everybody to jam a bag up there. If it’s a full flight, there’s a backup, nowhere to put the bag so its gets checked. It delays the flight and the customer gets mad. Will it be checked to my connection? Wait, I’ve got to get my medicine out. We don’t have those issues anymore. We’ve ended up with a better customer experience. Our total turn is down by 7 minutes because I’m not gate checking bags. Are we evil or are we actually the best option for consumers?

Cranky: Some people think that you’re being sneaky and trying to hide fees from them.

Barry: I want you to know what’s optional and what’s not and what’s included and what’s not. Part of the challenge is that there are so many requirements for disclosing this or that (not just in the airlines) and so people don’t pay attention. I don’t want to deceive anybody. I want people to feel good about the purchase that they bought. We just think the airline industry operated forever in a manner that didn’t give options. If you go way back, we assumed everyone wanted a meal.

At the end of the day, if you take a Haitian who lives in South Florida and they immigrated here 10 years ago and they’re living the American Dream and they want to go see their mother back in Haiti, who am I to say they need bags or they need a TV or they need food? We believe it’s our job to get them the cheapest possible way to go see their mother because otherwise they might not be able to afford it.

Cranky: But disclosure is a lot tougher for sales that aren’t through Spirit directly. And you do sell through third parties.

Barry: I think there’s frustration with the third parties. If they sell the ticket they should be obligated to tell our policies. How many times have you gone to Expedia and then you get to the hotel and there’s a $15 a day resort fee and it’s mandatory. Wait, so this is required of me and you didn’t tell me this? But they should have just said it.

There is an issue with people who haven’t flown us and bought us through a third party. The third party causes the most challenge. We like that distribution partner, but we’re not in all of them. We’re comfortable with the partners we have and we see value in it. We’re just trying to isolate the specific issue you mention. We’re not going to go to them with a big mandate, but at some point we’re going to have to figure out a way for them to disclose better and better present the options to the customer.

But the third party is a separate issue. When we changed our model in 2007 in a big way, there were people who had flown Spirit before who were not familiar with the new model. I’m not aware of a complaint we’ve ever got from Haiti, but routes that we had flown before, there was a higher propensity. There definitely was a conditioning of previous customers on previous routes. Last year was a good example. When we announced carry-on fees, we had these huge banners, maybe we went overboard. If I’m going to carry 700,000 people a month, if I get 99 percent, if 1 percent of people don’t know, that’s still a large number of people. I don’t know how we get every last person conditioned, but I’m committed to trying to get there.

Cranky: You talk about places like Haiti, but those are markets where people usually do bring a lot of bags when they go back to their families. There hasn’t been any backlash?

Barry: What we normally do to illustrate it to people is explain that your fares are going to drop so much that you can afford to go back and forth. Before you were paying $700 and you wanted to make that trip count, so you would take a gazillion things back with you. But now they don’t need to bring as much stuff. We see checked bags drop the longer we’ve been in a market.

And that was the end of the interview. I tend to agree with just about everything Spirit says, but there are a couple practices that I don’t like. First, Spirit charges an $8 passenger usage fee each way. This applies to everyone unless you buy at the ticket counter, so that’s how they get around it being considered optional. I’m fine with that, but I want a disclaimer that shows me that I can save $8 each way if I go to the airport. It’s not very clear.

The second issue is with opt-in versus opt-out. As Barry mentions, people do get overwhelmed with disclosures and end up missing things. So when, for example, travel insurance is already pre-checked for me and I have to opt out, that’s a little tricky in my mind. How many people fail to uncheck it even if they don’t want it? Of course, this will be going away with the recent DOT regulation change, so it won’t be an issue for much longer.

Other than, I like what Spirit does. I have no clue if they can make big city markets work, but hey, they think they can and the results have been promising in those cities with the trial balloons they’ve sent up so far.

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.)

There are a few reasons you might decide to go into a market, but the best is that it’s commercially viable. I don’t see that as being the case here. Here is a table showing the number of flights from the LA Basin to Vegas.

Yes, Vegas to LA is a big market, but as you can see, there is plenty of service including a lot from low cost carriers, not to mention carloads full of people who would rather drive anyway. So can Spirit come in and scrape a bunch of low dollar people out of the cars and put them on an airplane? Maybe. But I can’t see that being a profitable move, especially since a fare war is already in full effect. Even if the airline finds a way to make this profitable, is it really the best use for an airplane? I mean, these are brand new birds, and there has to be a better way to use them than this.

But there are other reasons airlines fly routes, like utilization. For example, Continental has an airplane sitting overnight at LAX, so it decided to send it to Hawai’i. It was either that, or sit on the ground. Heck, the entire America West Vegas Nite Flight hub was based on utilizing airplanes at night when they would otherwise just be parked. So is that what Spirit is doing here? It’s unclear, actually.

This isn’t one plane going back and forth all day. Three of the airplanes continue to Detroit, one to Dallas, and the other to Ft Lauderdale. So I suppose it’s possible that these airplanes had some extra ground time in Vegas before heading east again and this is how the airline decided to spend that time. But that doesn’t make a ton of sense either. There have to be less crowded markets that could be served from Vegas with similar distances. But why would that even need to be the case? There aren’t any slots in Vegas, and as an ultra low cost carrier, Spirit’s goal is to fly these airplanes whenever they’re ready to go, not necessarily at the best commercial times. For the people Spirit is courting, they’ll fly anytime.

I do, however, wonder if this is part of a larger assault on LA. These airplanes consistently sit on the ground in Vegas for 30 to 40 minutes. The times fit well. But in LA, it’s all over the map. I actually tried to connect the dots between airplanes the come to LA and I can’t. Some airplanes are sitting for almost two hours before there’s a flight going back. And one would actually require a 26 minute turnaround. It just doesn’t seem right the way these are scheduled. So I do wonder if more might be coming in LA to make this schedule fill out better. But then, why do you need 5 airplanes coming from Vegas every day? You don’t.

This could also be an old-fashioned ego fight. Maybe Spirit wants to send Southwest a message that it’s going to fight the airline on its turf, and this is a very good way to get noticed. These ego fights are just so stupid that I won’t even address it. If that’s the point, then Spirit is in trouble. I don’t believe it.

The last theory comes from Airliners.net. According to one poster, Vegas has two tiers of airport charges and part of the criteria to qualify for the lower rate is a certain number of flights per day. So Spirit is adding five more flights as quickly as possible to get to that point.

This one just doesn’t seem right either. I mean, Spirit has 9 daily flights this summer from Vegas before LA. Would it really make sense to fly 5 marginal-at-best flights to LA just to bring down costs on 9 other flights? The math just won’t add up on that unless we’re talking about an insanely big discount that I can’t imagine.

In the end, LA to Vegas is going to end up in an ugly fare war for the foreseeable future. It’s great for us Angelenos but not for anyone in the industry.

You guys have any theories on this?

[Original Vegas photo via Flickr user Bukowsky18/CC 2.0]

[Updated at 741a to reflect Delta's flights from LAX]

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Spirit Airlines should be all over San Juan, PR (SJU), a leisure and VFR (visiting friends and relatives) market that has never been comprehensively attacked by a low-fare carrier. With American Airlines’ pull-down in SJU, both intra-Caribbean and mainland markets from SJU are ripe for such a carrier, and no airline is better positioned to do it than Spirit. In fact it’s kinda odd that Spirit’s not already in there, given some of the other weird stuff it’s attracted to instead.

Let’s take a step back

Spirit Airlines is one of the odder survivors in the industry. It’s been around for 30 years, but only in the past five-to-ten years has it really made that much of an impression. It started off in Detroit, flying clapped-out DC-9s and MD-80s. For a while it was run by a guy with a science doctorate, but those weren’t its best years.

Spirit hit the big time when private equity investors had the following brainwave after seeing the initial success of JetBlue – hey, why not make Spirit the next low-cost carrier (LCC) success? If David Neeleman can do this, how hard can it be? This resulted in several rounds of private equity investment to the ultimate tune of well over $200 million. Yeah, that’s a lot of fricking money to plow into a (at the time) small, crappy third-tier airline. Made the investors who threw money at Virgin America, Skybus and JetBlue look like models of sober propriety by comparison.

Turned out that in fact, it was a lot harder than the private equity investors expected. Spirit lost a ton of money (at one point, it apparently excused its flailing by blaming the MD-80 for its troubles – Spirit was in the process of getting A320 family aircraft. That alleged excuse looked pretty thin after Allegiant became the most profitable airline in the US flying, yes, MD-80s). Ultimately, a new private equity signed up in the form of Bill Franke’s Indigo, heavily diluting Oaktree, the original private equity.

Still, it was a near thing. Spirit damn near hit the wall in 2008, when it cashed in its remaining fuel hedges at the top of the fuel spike to get through a cash crunch. This was an incredibly gutsy move, essentially recognizing that if the fuel price run up was permanent, then Spirit was screwed anyway, so it might as well assume that it was temporary – taking the value of its hedges in cash, betting that fuel prices would go down – a bet it won. If only Southwest had had the same guts and cashed in its own, rather larger, fuel hedges at the same time, Southwest might not have gone through a deeply unpleasant experience later that year when it faced its own cash crunch.

Spirit’s ultimate success, after years of financial mediocrity or worse, has hinged on, essentially, two things:

• Introducing low-fare service to the Caribbean and the parts of Latin America that are closer to the US from its Ft Lauderdale (FLL) hub. This was the first time this geography has benefited from such service and Spirit deserves a lot of credit for that.
• Fairly aggressively mimicking Ryanair’s ultra-low cost carrier model. This is perhaps most evident in Spirit’s publicity strategy, where, like Ryanair, it scores free publicity by courting controversy – such as the notorious commercial featuring a young man sleeping with his best friend’s mother. But much of Spirit’s current business model is inspired by Ryanair, one way or another.

What is Spirit doing?

What’s somewhat unclear, however, is what Spirit’s longer-term network strategy might be. Some of its recent network moves make sense, others not so much.

One that makes sense is jumping onto Allegiant-style routes to FLL, especially those on which Allegiant is clearly coining money, such as Plattsburgh, NY (PBG – a gateway to Canada thanks to its proximity to Montreal). Not only can Spirit duplicate what Allegiant’s doing, it can also offer PBG customers a lot of interesting connections via FLL.

Some that make less sense are odd routes to Niagara Falls, NY and Latrobe, PA. These are close to the existing low-fare airports of Buffalo and Pittsburgh. For that reason, Spirit is not adding a lot of value to consumers in those areas. It generally makes more sense for a low-fare carrier to enter routes where there aren’t already a lot of low fares – which is what Allegiant does.

American’s disappearing San Juan hub

Which brings us to San Juan, PR (SJU). For 25 years, San Juan has been a hub for American Airlines, but American is basically throwing in the towel. The SJU hub dates back to a time when American saw itself as potentially offering all things to all people, but in the last 10 years especially, the SJU hub has been a leisure-centered anomaly in an airline that depends on higher-fare business traffic to survive.

American’s SJU hub basically collected folks from the US and connected them to all manner of Caribbean destinations. Inevitably, not many of these passengers were business travelers. It simply makes no sense for a high-cost legacy airline like American to do that. So, as the above graph shows, American is getting out (the graph shows weekly departing seats in July for the last 12 years – you get a similar decline if you look instead, at, say, January, so this decline is not restricted to just one season).

So hop to it, Spirit!

So who should be in this business? Why, an ultra-low cost carrier like Spirit. The leisure and VFR (visiting friends and relatives) business is incredibly elastic, as Spirit presumably already knows. Offer low fares and watch the number of passengers soar. There’s a little bit of low-fare service to San Juan at the moment, in the form of Spirit itself, AirTran and JetBlue on select routes to the US mainland. But no airline has ever gone after SJU in a comprehensive low-fare manner, and few markets are likely to surge quite as dramatically from the presence of a low-fare carrier.

Further, no airline has ever done any serious intra-Caribbean low-fare service. Barbados-based REDjet is supposed to be on the verge of starting such service, but so far nothing.

The Caribbean is a very interesting market to experiment with in this fashion. Existing fares are extremely high – American flew turboprops from SJU to many of the surrounding islands, but the fares were nosebleed high. Local players like Air Jamaica/Caribbean (now one and the same at a corporate level) and LIAT aren’t very strong, despite not particularly low fares. Further, many of the routes are quite short (which is good thing in an environment with increasing fuel prices, since fuel is a smaller component of the cost of short flights) yet there is, for obvious reasons, no viable competition from ground transport.

Further, no low-cost carrier has more experience in this part of the world than Spirit. They’ve already worked through many of the issues of serving markets where, for instance, web-commerce may be less developed.

So, the remaining question is, what’s Spirit waiting for, and why fool with the likes of Latrobe, PA, when there seems to be a big opportunity in SJU that appears tailor made for it? Hopefully, Spirit is simply waiting until Puerto Rico is desperate and is willing to cut them a good deal on airport costs…

–
The Cardinal is a long-time industry observer, who is currently [redacted]. He was previously a [redacted] at [redacted]. Prior to this he worked at [redacted], [redacted] and [redacted]. To his sorrow, he lives in [redacted] and in his spare time enjoys [redacted with extreme prejudice].

]]> http://crankyflier.com/2011/03/07/hey-spirit-the-waters-a-lot-warmer-in-puerto-rico-than-niagara-falls-guest-post/feed/ 21 http://crankyflier.com/2010/11/04/spirit-turns-its-focus-to-the-us-and-canada-after-caribbean-build-up-2/ http://crankyflier.com/2010/11/04/spirit-turns-its-focus-to-the-us-and-canada-after-caribbean-build-up-2/#comments Thu, 04 Nov 2010 16:27:30 +0000 CF http://crankyflier.com/?p=6274 Spirit has spent the last few years remaking itself in the public eye. It has gone from a Detroit-based low cost carrier to what is now considered a Ft Lauderdale-based ultra low cost carrier. The focus has gone from domestic flying to the Caribbean, but now Spirit is turning its eyes back on the US and yes, Canada. With a profitable operation, new airplanes coming online, and a fantastic cost structure, Spirit is now hunting for its next growth opportunity.

There are several new routes being announced, and I think they can be grouped into a couple different categories.

• Ft Lauderdale and Myrtle Beach to Plattsburgh, NY; Niagara Falls, NY; Latrobe, PA; and Charleston, WV with less than daily service
• Dallas/Ft Worth to Ft Lauderdale and Las Vegas twice daily
• Myrtle Beach to Washington/National daily

So what’s going on here? Most of these are an attempt to get Spirit in on the Allegiant-model. Plattsburgh and Niagara Falls are without question targeted at those pasty-white Canadians looking for sun:



Allegiant long ago figured out that if you fly close enough to the Canadian border, Canucks will flood across to save on all the insanely-high international taxes. That’s why Bellingham (near Vancouver) has been such a boon for Allegiant, as have other unlikely places all along our northern border. Now Spirit wants in on the act. Niagara Falls is tougher because Buffalo and its low cost carriers are nearby, but Plattsburgh is all alone far from, well, anything. Granted, Spirit won’t be alone at Plattsburgh since Allegiant already has a substantial presence there, but it’s still worth taking a shot.

Latrobe and Charleston look like more traditional Allegiant-style flights carrying people from small towns to big city vacation destinations. Charleston isn’t exactly a small town, but it does serve many small towns in the state of West Virginia with little low cost service around. Allegiant chose to fly 50 miles down the road in Huntington instead, so this is an opportunity for Spirit. Latrobe is only 40 miles southeast of Pittsburgh, but that one has me scratching my head. I mean, Pittsburgh’s airport has low cost service already and is an easy airport to use. I’m not so sure that this one makes sense, but my guess is that Latrobe is paying for the privilege somehow so Spirit figures it can see what happens.

The Dallas moves are obviously completely different. This to me looks like an effort to finally crack that nut, something that has escaped airlines until now. Spirit has gone into Dallas before and quickly pulled out. Maybe now with a better cost structure and Virgin America coming in from the West Coast, Spirit thinks it can withstand the inevitable American onslaught. Spirit’s twice daily flights to Ft Lauderdale will help give strong, low cost connecting opportunities into Caribbean destinations, so that should be the focus. After all, American has kept Caribbean fares high for a long time. Not so sure about that DFW-Vegas run. I suppose the closest thing to a low cost carrier on that route is US Airways, so maybe there is an opportunity. If it doesn’t work, I’m sure it can disappear quickly.

And that last Myrtle Beach – National flight? Bleh. Just taking advantage of slot actions at National, I assume. Might as well lump that into the rest of the announcement.

While I’m lukewarm on some of these cities, I think Spirit is doing the right thing. The airline is going to start experimenting further with its ultra low costs. There have to be more places that will work for them, and they aren’t all in the Caribbean. Look for more cities to come online as Spirit looks to see what works and what doesn’t.

]]> http://crankyflier.com/2010/11/04/spirit-turns-its-focus-to-the-us-and-canada-after-caribbean-build-up-2/feed/ 26 http://crankyflier.com/2010/10/02/cranky-on-the-web-september-28-october-1/ http://crankyflier.com/2010/10/02/cranky-on-the-web-september-28-october-1/#comments Sat, 02 Oct 2010 10:45:15 +0000 CF http://crankyflier.com/?p=6051 Southwest Acquires AirTran: Six Reasons This is a Great Move – BNET Headwinds
Part one of my story focused on the positive things to come out of this merger.

Lambert cautious over Southwest-AirTran deal – St Louis Post-Dispatch
I was asked if I thought the AirTran/Southwest merger opened up any opportunities for St Louis. I think the quote they used was a bit too optimistic sounding.

Southwest Acquires AirTran: Four Reasons This Isn’t the Best Plan – BNET Headwinds
And now for the potential downside. Lots of people are hyping up the merger, but there is always a downside risk.

Spirit Airlines is Going Public and Its Business Model is Producing Stellar Results – BNET Headwinds
Spirit is going public and that means we have data to play with. These guys are doing very well.

Mesa Air Group Shows Everything That’s Wrong with the Bankruptcy Code – BNET Headwinds
In case you missed Mesa’s reorganization plan, you’ll want to take a look. It’s a frustrating look at how management can take advantage of the bankruptcy process.

Combining airlines may be challenging for Southwest, AirTran – Ft Worth Star-Telegram
Lots of questions for me on the Southwest/AirTran integration and any potential bumps along the road. (Though the pay rates quoted aren’t right. Those are closer to what a 10 year captain makes.)

]]> http://crankyflier.com/2010/10/02/cranky-on-the-web-september-28-october-1/feed/ 1 http://crankyflier.com/2010/09/17/taking-the-knee-crunching-saddle-seat-for-a-test-drive-i-like-it/ http://crankyflier.com/2010/09/17/taking-the-knee-crunching-saddle-seat-for-a-test-drive-i-like-it/#comments Fri, 17 Sep 2010 10:45:32 +0000 CF http://crankyflier.com/?p=5959 Ok, so I didn’t actually take the new saddle seat for a test ride. I mean, it was a static display in the Airline Interiors Expo hall, but I did get to sit in it for awhile and check it out. The verdict? It’s absolutely uncomfortable, but I think it’s a great idea. Kudos to Aviointeriors for at least trying to come up with a solution that matches passenger demand. The only problem? I can’t see how this passes regulatory hurdles. So I suppose I should put those kudos on ice.

You’ve heard about this thing, right? Well, if not, take a look at this bad boy:



But that picture doesn’t really tell the story. Instead, take a look at this picture with me squeezing myself into the second row.



As you can see, I’ve got a wedgie like no other. Kind of like when I first went horizontal in an angled lie-flat seat. The seat itself isn’t very comfortable. It has no moving parts, so tall people are in real trouble. (You’d think they’d have an up and down function for tall people, but that adds parts and weight. They may need to rethink that.) It doesn’t recline either. There is a tray table, but good luck using it for anything. Oh, and the armrests are even narrower than in coach. That combined with the fact that the saddle seat pushes your legs sideways means you’ll have a very intimate experience with your next-door neighbor.



So, uh, what do I like about this? Well, there are a lot of people that just want cheap fares. This seat weighs a lot less than a regular seat (the goal is to get it under 5kg per seat) and it takes up a lot less space. So that means lower fares can mean higher profit. This seat has 23 inches of pitch, which means that it’s 23 inches from the front of one seat to the front of the next seat. Compare that to a roughly industry standard 31 inches, and you can fit a lot more in a space.

Let’s look at a Spirit A321. Spirit has roughly 30 to 31 inches of pitch, but let’s just assume it’s 31 inches for simplicity sake. Here’s what the back cabin would look like with the saddle seat.



Instead of 82 seats in the back cabin, you can probably squeeze 112 in. Pretty good, eh? But let’s put this another way. If Spirit needs to make $75 per seat on a given flight to break even today, adding the saddle seat in that back section could bring in the same amount of revenue at only $55 per seat. That’s a big difference for the passenger.

I don’t see this kind of seat as being the kind of thing most airlines would want, but even those that do wouldn’t outfit their entire cabins with this seat. Think of it as Economy Minus. (or, on United, Economy Minus Minus.) I could see low cost airlines with a large percentage of short haul flights looking to take advantage of this seat. Think of Spirit, Allegiant, Air Asia, and yes, Ryanair. If the price is right, people will do it. It’s the right fit for some airlines, and I imagine we’ll see someone try something similar at some point.

But there is one huge, ugly problem. Regulation. The Aviointeriors people said that they’ve been in touch with the regulatory bodies and they don’t foresee a problem, but I do. In particular, I wonder if these seats will be able to meet evacuation test rules which require everyone to be out of the plane within a certain amount of time. Also, the seatbelt wasn’t on the seat, but it rides really low over your legs. I think that may need to be changed. (I wish it had a harness to keep you from spilling over and prevent you from breaking your skull on the seat in front.)

But if they can get past the regulatory problems (and that’s a HUGE “if”) this seems like a great idea to me. I, however, will be happy to pay more for a real seat.

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