Topic of the Week: At What Point Does Spirit Become a Threat?

Spirit

You know this question has been asked in US airline headquarters for years. Spirit is growing, so when is it a real threat? We’ve just seen a massive expansion in Atlanta with 9 new destinations announced. LA is getting a few more too. Sure, some airlines are already trying to compete, but nobody has really turned the screws that I’ve seen. What say you? Is it time the other airlines get more aggressive?

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34 comments on “Topic of the Week: At What Point Does Spirit Become a Threat?

  1. Spirit’s strategy is really smart. They go into high traffic airports and large metro areas (with some exceptions – Atlantic City and Myrtle Beach) and siphon off the portion of travelers who do not care about amenities and frills. Their a la carte pricing method strikes a chord with millennials and budget minded flyers. There are certainly parallels to what SWA used to be, although you won’t see them in places like Omaha, Manchester or Burbank. They also have a formidable route map in the Caribbean and Latin America.

    I give them a lot of credit for finding a niche and for growing in a disciplined way. Prediction for cities they will serve in the not too distant future: Cincinnati and Seattle.

  2. very tough to decide.

    On the one hand, Spirit stimulates a lot of markets at the value end, so I am not sure how many current fliers will switch to them. And even if they do, as I have learned from personal experience, it is a one-times switch. And with many routes less than daily, or 1x, or redeye times, a lot of the flights are really targeted at budget fliers.

    With some 14 planes coming next year (6 are a321), that’s a lot of growth, especially for an airline that utilizes its birds over 12 hours per day. If Spirit stays on a lot of these routes long-term, it may eventually become a threat. Spirit is creating a following in key cities – LAX, ORD, LGA, and the only carrier who seems to be able to beat them is B6 in FLL, though that is mostly on Caribbean routes which NK is de-emphasizing.

    But what can other carriers do? Their base ticket prices are so high that to get aggressive means either doing what DL is doing with basic economy and stoop to Spirit’s level, or go UA vs. VX style and flood cheap capacity which would cost a fortune.

    I will never fly Spirit again, but I have great respect for the company for knowing its model and following it to the nth degree. Everything is a la carte and every fee is clearly displayed. Their model works well when they can cherry pick expensive routes and pick off pax 200 at time. It will be interesting to see how they have to evolve when markets mature or low hanging fruit disappears.

  3. CF, this was pretty timely, since I just emailed you about ATL last week. Both Spirit and Frontier seem to be doing the same thing in ATL. To get to smaller markets in the Caribbean, Spirit actually offer better flight & arrival times than Delta, so that is our reason to fly them. As far as their service, fly them the first time, and you know what you’re getting into. I can deal with it for short flights. Now if they want to start flying International from ATL, then they would be a big thorn in Delta and SW, and could put pressure on flights, especially where could serve and Delta doesn’t. I also think the City or Airport is offering incentives for new routes, maybe more growth in the future. Bring on the competition!

    1. Heh.. What about Bolt Bus and Amtrak?

      Though this does remind me of a coworker who was traveling halfway across the country on Greyhound because airplanes are dangerous.. I attempted to convince him otherwise, but I wasn’t able to.

      Eventually Spirit will have to start explaining that flying is safe to the Greyhound crowd.

      1. Coach on Amtrak is way more comfortable than Economy Class on Delta/United/American/Southwest, let alone Spirit/Frontier/Allegiant.

        Spirit is a threat of the majors’ own making. By constantly bringing their own product down closer and closer to the level of Spirit, the cost-benefit analysis starts to tip in Spirit’s favor. As the majors tack on and increase more fees (checked baggage, seat assignments, food, and so on) and at the same time make the seats themselves less comfortable (going to 10-across in the 777, JetBlue decreasing pitch, Southwest’s Evolve seats) and the ongoing mediocrity of the attitudes of their customer service staff (ground and inflight), people will start to wonder: “If I’m going to be treated badly, be nickel and dimed, and be uncomfortable, I might as well spend less and fly Spirit”.

        1. …and (at least in the NE corridor) Greyhound itself is way more comfortable than coach, and somewhat comparable to Amtrak’s NE corridor service — free wifi, power at every seat, actual legroom.

          If traffic isn’t an issue then Greyhound actually provides a suitable alternative to both amtrak and air travel for short hops!

          1. What this country REALLY needs is train service similar to what you see in Europe. Multiple classes of accommodations, so you can choose what’s right for you. Ironically, the USA actually had fabulous trains until Boeing gave us the 707.

            1. The automobile also had a hand in killing passenger trains, perhaps even moreso than the Boeing 707.

              Also many of the distances in Europe are much shorter than those in the US.

  4. Spirit with one or two flights between two cities isn’t a treat to a legacy carriers with 5+. If the big boys were worried, they would be doing whatever they can to grab those once a year travelers, the familes, the college students, the ‘we just want a low fare’ flyers which they aren’t otherwise money would be spent making coach a luxury cabin and not first/business.

    People flying Spirit want a low fare and will put up with their operation which treats everyone the same unlike legacy who’s management and staff treat coach people like they are the scum of the earth and first and business travelers like they were Gods.

    1. “which treats everyone the same unlike legacy who’s management and staff treat coach people like they are the scum of the earth and first and business travelers like they were Gods.”

      Perfect comment about Spirit. I fly Spirit all the time. They are not always the cheapest, and I don’t mind paying $5 for Coke and chips when I pay average of $200 per trip than other airlines. Their in flight experience is no different than any other carrier.

      I fly them because they don’t treat anyone special. Everyone pay for an advance seat assignment, everyone pays for check bags, where legacies waive all fees for premium frequent fliers.

      Spirit is a great airline, and I love their selection of 30 daily flights out of DFW, and completely under the radar. Since they do onesy, twosy, between cities, they will never be a threat to AA who is seeking connecting traffic…Spirit is ‘cherry-picking’ local traffic out of DFW!

  5. It’s going to take a lot more than what Spirit has going now to be anything more than just a minor annoyance to the legacies. Take DFW for instance. NK currently operates 26 daily departures, but the max frequency on any single route is 3x to FLL (they also fly 2x to ATL, MCO, and ORD). Everything else is a single daily. Meanwhile, AA operates 15x to ORD, 11x to MCO, and 10x to ATL (plus another 12x on DL). FLL is the only market where the two are close on frequency, with 6x on AA, but then they add in 3x to PBI and 11x to MIA. I’d guess Spirit would have to increase to 4x-6x per day before AA considered them a real threat, but if NK were to do that, they’d be busting their business model of low frequency/high utilization that seems to be working right now. Also add in that NK is after the super el cheapo traveler that the legacies don’t really seem to be interested in courting these days. As long as they stick to once or twice dailies, I just don’t see the legacies wasting their time or energy fighting a non-threat.

    Now, the airline that I think should really worry about Spirit is VX. Based on their behavior at DAL at least, nuclear price wars seem to be the name of the game, but since they’re also running, at most, 3x-4x dailies, it seems to me they’re chasing much the same dollar as NK is. And yes, those travelers will drive to DFW to save $10 with Spirit, no matter how hip and cool the new kid on Cedar Springs is.

  6. NK ‘s biggest accomplishment over the past few years are in its transparencies. Biggest gripes in years past were ‘gotcha’ fees that unsuspecting, infrequent travelers encountered. They know their demo, stick to the play book and deliver a ‘you get what you pay for’ product with no apologies.

    Here in the East, I know a number of upscale (high mile legacy elites) consumers who bite the bullet and endure 2-4 hours of torture just to go south of the 31st parallel. They do it because redemption to sun destinations are impossible in the winter.

    They are not poaching legacy bread and butter….they are scooping the resin at the bottom of the pot. The Caribbean flying is not geared to lure the St. Kits 4k a week resort goers. It is designed to attract the St. Kits expat who works 2 jobs in the US going home to see family.

    As others above have stated or implied; they super price conscious customers are of no concern to legacies. There is not allot of excess capacity plying the skies so there is no incentive to price at (or below) cost to put butts in seats. So in a nutshell, no…they are not a current threat. However, when the next downturn comes along , they will be more than a mere menace.

  7. Attempting to match them on price is an insane endeavor, and will likely just result in the old marketshare wars of the past. The majors just need to maintain capacity discipline, as well as continue to upgrade the hard product. The reality is Spirit is not likely to touch long-haul intercontinental routes, and the legacies will continue to be bolstered by business travelers and those looking for more service.

    The question is really not for the legacy airlines, but for Frontier, which is Spirit 2.0, and the middle of the road airlines of jetBlue and Virgin America, and the smaller regional of Sun Country. Those airlines are the one most likely stuck in an unenviable position between the vast route networks of the legacy without the low prices of Spirit. Frontier seems to be pulling back from its experiment in serving tertiary airports, which I think is a mistake, as I see it as hard to them to simply being a “friendlier” Spirit. jetBlue and Virgin America try to strike a middle ground, but I’m not sure if fliers WANT that middle ground.

  8. When. I don’t know.

    IMO, there is a symbiotic relationship between legacy and Spirit and where the former plays the host and latter the parasite–no ill intent intended with the comparison. On the one had spirit provides the legacies a “cover” from the gov’t as they can argue there is “competition”. Spirit, for its part, knows how to play that game and gets after it.

    So when, I still don’t know but i’ll offer what may be a sign of when, if ever. Whenever the next recession hits and is severe enough to force the “high-flyers” to look at spirit more and more.

    anyhow, just an opinion.

  9. When I lived in Florida I was happy to fly Spirit on the ~70 minute FLL to Cancun or Jamaica flights. My wife and I would share 1 large checked bag and then bring small under-seat bags to keep the fees down. Of course we would choose either JetBlue or AA if the fares were decent, but Spirit was typically much lower in cost. Their flights were also well timed to get to the resorts at check-in time. For a short flight in areas where weather cancellations are not an issue it really doesn’t matter which airline you choose. Sure the 28″ pitch is tight, but I do appreciate that the guy in front of you cannot recline.

    Regarding that Atlanta to LA flight…good luck with that! Spirit would have to be several hundred dollars cheaper to convince me to choose them over Delta, Southwest or ANY other carrier. 4 or more hours in 28″ is just torture, especially for those of us who are tall.

  10. Here’s a thought to roll around: Is the rise of Spirit the start of the unraveling of AA’s invention in the early 1980s of adding ticket restrictions and pricing timing to put the vacation charters and business travelers on the same plane?

    Its a small, small step, and I’m sure the legacies will defend some of those el cheapo vacation prices, but perhaps theres a bit of a start in that direction?

  11. Each of us has our limits as to how far we will go with an airline. For me, flying any airline where the seat pitch on just about every seat is 28″, I draw the line. Spirit, if they care to, may wish to entice me with a free flight every day. I respectfully decline.

    Spirit has some redeeming social value to the extent that they somehow cause someone like UA to be be willing to match their fares, like $98 or $106 each way BWI-LAS (unbundled, I believe the fare is $1.99 but that awful government forces Spirlit, so they say, to charge a hundred dollars so) and lo and behold, UA on many days matches fares. Why, I’m not sure!

    Oh yes, I welcome Spirit’s plans to operate BWI to LAX this summer. I trust the UA pricing folks will come up with a matching set of fares.

  12. I guess I am one of the induced customers. Last November, I needed to use up some vacation time and wanted to go visit the East Coast. Flights out of Little Rock were upwards of $400 (all with connections), but I found a $130 nonstop round trip out of DFW (5 hours away) a week beforehand. I never would have done something like that on a business trip, but living out of a backpack for a few days didn’t bother me, and Spirit made possible a trip that otherwise wouldn’t have happened. Besides, I don’t fly to be comfortable, I fly to get where I am going.

  13. First, the legacies typically do NOT match fares with ULCCs on routes where they compete. So AA et al isn’t going to match these fares. At least not now.

    The model the legacies should watch, though, is Ryanair and to a lesser extent EasyJet. I realize that Europe is different, but the ULCCs have really taken a bite out of the bigger legacy national carriers. Right now, 26 flights out of DFW is not a problem, but that will grow slowly.

    At some point the big boys may have to deal with these ULCCs. This is mainly because for the average traveler, flying on American or Delta is really not that different from flying Spirit. They get crammed into a crummy seat, get charged for bags, get charged for better seats, and get charged for meals. The only free on a legacy carrier compared to Spirit is a soft drink, and maybe a couple of inches of legroom. MAYBE that.

    As people realize this, in time more will choose to go the ULCC barebones route. Eventually, this will begin to create downward pressure on coach fares on the legacies. Not a ton, but some.

  14. Well, I was an ATL based Platinum Medallion, but I now fly Spirit whenever I can and look forward to the new routes. I want to see DL squeezed. They have become too proud and deserve to be taken down several pegs.

  15. Spirit is simply a horrible and profitable airline. If you like smelly hounddog busline-like passenger experience (much worse than the pajamas party, with pillows nontheless in row 5 on Southwest) along with a rip off bad car mechanic pricing strategy (read: Spirit has ridiculously and deceptively cheap fares but wait they ARE NOT cheap once you do the fuzzy math!) then Spirit is your airline!

    I did 3 trips with Spirit last year and called 3 strikes – your Out!

    Incompetent gate and check in staff who failed to check people in fast enough that some passengers were forced to miss their flight

    Cookie Monster crumbs infested seat with a side if melted and squished M&Ms in the seat pocket. Table tray had a good replica map of South America from a thin, matte finished carmely sticky substance. Barf bag was missing… hmm.

    My crew bag (same used by Delta FAs and pilots) was checked because it was ‘oversized’ (American, Virgin, JetBlue and Emirates had no issues with my roll aboard)

    Flight attendants couldn’t figure out how to opearte A319 cabin lights so we flew 3 hours in the middle of the night with at full brightness. Same FA crew were reading all of the announcements from a small book. Come on, you know the lines (…as the exit may be behind you…)

    I could go on.

    Credit is due for Spirits terrific cockpit crews – top notch professionalism.

    But JetBlue and Virgin America both win my highly coveted 2015 “Best Pie to Fly in the Sky Award,”as they both rock for customer service and provide good quality and clean planes at a reasonable price (and cheaper than Spirit’s fare once you buy your seat, pay for your bag(s)and your soda with out chips on the flight.

    Your friendly pax in seat 13F.

    1. I always know I will add $90 to a Spirit ticket…$20 RT for seat assignments, and $70 RT for roller bags!

      Too bad you’ve had a bad experience with the planes! Everytime I fly, it’s always a brand new A320 with sharklets!

  16. They will become a threat when they start taking incremental steps to improve customer service (ala Ryanair). That’s when the lines begin to blur on what customer segment Spirit is going for and they really begin stepping on toes. For Southwest, they are redefining “low fare” (base fare not all in) and puts the low fare brand (real or percieved) at risk. Currently they have the model to reach critical mass: fly under the radar, take customer who don’t travel or majors don’t care about (sounds like southwest in the 80’s). It will be very interesting to see what the next evolution of spirit will be.

  17. I think the parasite analogy is a good one. Spirit will take some travelers on high-volume routes, but they can’t compete with the legacies on route network. I do most of my traveling out of (and between) OMA and MKE, both cities that Spirit doesn’t serve. So long as Spirit can’t take me where I’m going, United (and occasionally American) will get my business.

  18. Spirit would need to have enough frequencies on their routes to be a threat to the majors.

    Also, their fees upon fees and lack of legroom would make sure I would never fly them. It’s not too hard to avoid fees with the major airlines, especially if you fly more than 25,000 miles with them.

    1. I agree with the frequency part. Outside of their main strongholds, their frequency is lacking and often times it is impossible to find a time that works that hasn’t already jumped beyond where the fee set up makes it as much or more than a legacy. If services such as Lugless were more competitive on price vis a vis fee’s, it would also be a better option, but in many situations its just not worth it. On other carriers you can slip by with a generously sized carry on, but even carry on’s are charged on Spirit which again puts you close or at the same as other carriers.

  19. NK is very welcome here in Houston. They’re typically a lot cheaper than UA or Southwest, even after the extra fees on NK are added in. Starting On March 1st UA guts Mileage Plus so there is little reason to fly them anymore. Coach service on UA and BK is very similar– a flight attendant comes around trying to sell stuff. Why pay more for this priviledge on United?

  20. The only time I’d feel threatened by Spirit would be if I ever set foot in one of their cramped, dirty, ugly planes.

  21. If Spirit continues and comes close to what Ryanair and Easyjet are able to offer in Europe then legacy carriers will start to become worried. KLM/Air France and Lufthansa are failing to keep up with the low cost model (Transavia and Germanwings). IAG has a diversified market and is further along the path than the other two.

    There are always people that want to get somewhere, don’t care how but will worry about price. Unlike an AVGeek, they will not care about anything other than ‘it’s how much from A to B?’. Therefore, Spirit cannot lose. It’s not like Ryanair struggled financially when the customer service was so poor….

    Keep it simple. Same type of aircraft, same brand, cheap prices. Customers will follow.

  22. low fare airlines are here to stay and the big boys think they have to lower their fares to compete….what can one flight a day due to an airline that has 5 flights a day….sure they will get people taking the low fare side and it will be people who don’t fly a lot so this is like a new market….the big boys need to worry when the low fare airlines start matching number of flights to the number of flights the big boys have in a market…..Frontier is a good example of adding flights and then dropping them….if a market isn’t making money, Spirit will drop the flight and go somewhere else…over reaction is the biggest way to waste and lose money in this business….panic mode is adding more flights and charging the same low fare’s as Spirit on all their flights….the smart way, lower your fare if your flight and spirit leave around the same time, not all the flights….if you have to add flights because you think you have to, just add a flight around the same time as spirit and charge the same fare on that flight…..it is funny to me watching how the big boys re-act when Spirit enters a market and the big carrier it is going to compete with….i picture management running up and down the halls at the corporate office yelling Spirit is coming, Spirit is coming, what are we going to do…..add flights, lower fares, spend however much you can on advertising….this is how i picture Alaska Airlines doing with Delta….smart people know the smart way to travel, you have a low fare or you have a higher fare that’s about $20-$30 higher, i’d take the higher depending on how long the flight is…

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