It’s Spirit week here at Cranky, and not in the “ra ra, go team” kind of way. I’m talking about Spirit Airlines. I actually hadn’t planned on talking about them twice this week, but soon after the Cardinal’s guest post went live, I saw Spirit announce one of the strangest route additions I’ve seen in a long time. For some reason, the airline is going to fly five times a day from LA to Vegas. I don’t get 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]

It’s been awhile but the Cardinal is back. And he’s got some good advice for Spirit . . .

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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…

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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].

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.

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.)

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.