Spirit’s Turnaround Plan is Filled With Hopes and Dreams, Few Specifics


To the surprise of nobody, Spirit lost a bunch more money in the fourth quarter of 2023. In fact, it lost over $160 million excluding special items for a miserable -12.4 percent operating margin. This is not good, but it was also expected. The question now is… how does Spirit fix itself? The details are sparse, but we know a little more after the earnings call.

JetBlue also presented a turnaround plan this quarter, and while I wanted more details before being able to really judge it, I liked what the airline was willing to say. With Spirit, it wasn’t willing to say much at all.

Overall, it appears the plan is to get paid by Pratt & Whitney for the aircraft that are grounded due to engine issues, try to get utilization up if the government can fix air traffic control issues, and hope for a return of demand in the domestic market. That’s right, all three of these are out of Spirit’s control which is not what I’d consider a turnaround plan.

But there is one thing that Spirit is planning on fixing, and in fact it has already done much of the work it plans to do. I’ll let CEO Ted Christie explain.

In October, we stated we were prepared to make the necessary strategic shifts to enable Spirit to compete effectively, and we began to do just that and are executing on a plan that we believe will provide us a platform for margin health. We are making changes to network construction, peak versus off-peak flying and geographic and market concentration, and we’ll assess the success of various components and make some inevitable adjustments.

Alright, since everything else requires outside parties to grant Spirit’s wishes, let’s take a closer look at the one thing Spirit plans on fixing that it can control. First, there is the talk about peak vs off-peak flying. Yes, that is happening, and we’ve seen it happening for weeks, as we’ve written in Cranky Network Weekly. Let’s look at how things are developing today in terms of seat capacity.

Data via Cirium

First, you can ignore everything after early April in 2024. That is just a placeholder, and it will be changed significantly before it’s real. But do focus on January and February. Spirit had a little day-of-week variation last year, but it is nothing compared to this year. It is sitting a lot of airplanes on peak/off-peak days, which would seem to counter the goal of increasing utilization. But those flights must have performed terribly, and this is sensible.

From mid-February, it reduced the variation, because we start getting into the early spring break period. The variation disappears almost entirely once you get into March when the peak spring break happens.

Despite these changes, Spirit is still not expecting a good first quarter. It put out guidance for investors that it is again predicting to be between a -12 and -15 percent operating margin for the quarter. Then things will magically turn around and start generating cash in Q2 and Q3. Ok, ok, I suppose it isn’t magic… since that assumption relies on getting paid big bucks by Pratt & Whitney.

That’s right, Spirit is including Pratt’s payments for all those GTF engine issues in its guidance. There will be money coming at some point, but that is hardly indicative of the airline being fixed. That just means it got lucky and will get paid more than it would likely be able to profit flying those airplanes. This will temporarily make the airline look better than it is. But back to what Spirit can control….

While we don’t really know what Spirit is going to do to its network beyond early April, we can look at March to see how different things are year over year. After all, if the airline is, as Matt Klein, Spirit’s EVP and Chief Commercial Officer says, “continuing to make other adjustments to the network that better align our capacity towards markets where the supply-demand trends are more in balance.”

So, let’s take a look, and the first thing I’ll show you might surprise you.

March 2024 vs March 2023 Spirit Airlines Seats

Data via Cirium

If you’re an airline trying to re-balance your schedule away from where there’s too much capacity, doesn’t it seem rather strange that Florida would be up so much while the rest of the network is down? We do have to remember this is spring break, so it is the peak time, but the devil is in the details on this one.

Spirit Departing Seat Changes by Florida City

Data via Cirium

It’s really all about Fort Lauderdale. Sure, Fort Myers has seen some bounce-back from the hurricane that roared through just a few months before March 2023, and Tampa has grown as well. But the net number of new seats in Fort Lauderdale is more than the rest of these combined.

While Spirit is actually down, if ever so slightly, in Orlando, it is refocusing its efforts on its home base in Fort Lauderdale where it thinks the opportunity is much greater. The idea isn’t necessarily about running away from Florida, just Orlando. And even then, Spirit isn’t exactly running away. It’s just sashaying slowly.

If we look outside of Florida, how about taking a peek at the biggest gainers and losers year-over-year by aggregate number of seats?

March 2024 vs March 2023 Change in Departing Seats by Origin

Data via Cirium

The biggest standout is, of course, Las Vegas on the downside. This is actually a drop of over 16 percent, by far the biggest cut among top Spirit cities. But notice what follows… Atlanta and Los Angeles. These are big markets, really big, but Atlanta has had a lot of Frontier competition while Los Angeles has a really high cost problem plus plenty of capacity from many other airlines. 

The gainers are LaGuardia, which is only because of temporary slots, but then there’s Charlotte which is a market that Frontier recently jumped in with both feet. After Newark, it gets pretty beachy. Cancún is one I find very odd since on the call, it was mentioned that Cancún still has “material unit revenue declines.” Hopefully that’s not Spirit’s best idea.

But beyond March, it’s all confusing to me. Spirit says Q2 capacity will be up in the low single digits while Q3 will be up in the high single digits. Meanwhile, it says it has 25 airplanes grounded to the start the year, rising to 40 by year-end. By the end of Q2, Spirit will have retired 10 A319s, taken delivery of 7 A320neos along with 8 A321neos. I don’t see how it can be up on capacity with so many airplanes on the ground. It seems like more has to change.

Even if it goes as planned, will this turn the airline around? Not alone, as we’ve already discussed. It needs other things to go right as well. This seems to be in stark contrast to Frontier which has been hard-charging with a plan of its own. And part of that plan seems to be “murder Spirit.“ You can be sure that Frontier isn’t the only one thinking about ways to kill Spirit. I’d imagine pretty much any airline would be happy to sit on the airline in any market for a short time if it means the airline goes away.

The question is, can Spirit last long enough to make the other airlines stop with short-term murder tactics? It has about a billion dollars in the bank, which is ok. But it also has several things it can still put up as collateral to raise money. Spirit said it has $350 million in “hard assets,” about $500 million worth of equity in its fleet, and another $425 million in pre-delivery payments for future airplanes. On top of that, it has around $250 to $300 million it can pull out of the new headquarters building which it built with cash. So there is some runway here, but now it’s just a race to see if it can right the ship before it runs out of ways to raise cash. After all, cash is king in this business.

I’d like to see a more comprehensive turnaround plan from Spirit than what they’ve put forth. I’d also like to see a bigger piece of that plan being something Spirit can actually control. It seems like the network team is doing its job, but that is not enough. More urgency is needed here.

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31 comments on “Spirit’s Turnaround Plan is Filled With Hopes and Dreams, Few Specifics

  1. While interest rates are still higher than near-record-low interest rates that we enjoyed for many years, the US economy is doing fairly well at the moment, with relatively low unemployment, high GDP growth, high stock market valuations, and with inflation coming back down to earth.

    To your point, a “plan” based on hopes and prayers and outside factors going right is rarely a great plan. Spirit needs to use this time very wisely and work hard to get back on course (and build up its liquidity and operating cash flows) quickly, or the next economic downcycle could easily wipe out the company or force an unequal merger where a competitor buys out the shell of what was Spirit.

    Alternatively, an activist investor may push Spirit to take more drastic actions, but it appears that Carl Icahn is going blue, not yellow.

    Aside: That yellow face illustration is the most horrifying image that I’ve seen on this blog in the 10+ years that I have been reading it.

  2. It looks like Spirit is playing “Press Your Luck,” but Tedd Christie is no Michael Larson.

    If this is the turnaround plan, then I’m doubling down on my 2024 prediction of continued weakness in the ULCC’s witch will lead to a bankruptcy.

    1. I love that reference to Michael Larson.

      I’m a big fan of people who find creative and honest ways to “beat” the systems, like Michael Larson on “Press Your Luck”, Ted Slauson on “The Price Is Right”, and Mohan Srivastava with the Ontario scratch-off lottery tickets, among many others. Those types of people keep everyone making the systems honest and help drive improvements.

      1. Did you ever see the GSN documentary on Michael Larson? They showed how he broke the game. Peter Tomarken as well as staffers from the show tried to paint him as this creepy guy out to make a fast buck at the shows expense instead of admitting they were just outsmarted. The CBS legal department tried to deny him his winnings, but came to realize they had no case & therefore chose to just not promote his accomplishment.

        1. I’ve watched at least one 40+ minute documentary on YouTube about Michael Larson. Definitely seemed like a case of lazy/unthinking technical design, but not many people (especially before the age of DVRs, let alone digital video online) have the patience to record and watch so much video from TV broadcasts.

          1. Originally there were six different spinning patterns when Michael Larson went on the show, but it was increased to twelve to prevent a repeat.

            There was one other rule change & that being a CBS imposed $75,000 winnings cap, although one could play up to $50,000 instead of $25,000 as that limit was being broken regularly. A year later the cap was raised to $75,000 before the shows cancelation.

  3. NK trying to build FLL into a fortress hub, or as much as it can be?
    Not the worst strategy but can they get to the scale required quickly enough?

    1. US Airways learnt that a LCC w/ hubs doesn’t work the hard way. You would be throwing away money without premium seating, lounges, codeshares, international, etc.

      1. US was never an LCC. NK has been at FLL for at least two decades with a Caribbean hub. They were there when US tried the whole FLL hublet thing. NK @ FLL was pulling “some” South Florida – Caribbean traffic away from AA @ MIA. US was attempting to fill a niche that was already filled. Hardly an apt comparison today.

  4. Hi Brett, DEN should be on the March ’24 vs ’23 chart (unless you are excluding market exits). It’s down ~39k seats.

  5. Not surprised to see that drop at PHX. Frontier has expanded at PHX pretty aggressively, so I would assume that came at the expense of Spirit. I wonder if similar dynamics are at play at the other cities where Spirit has reduced capacity year over year.

    Perhaps they are taking a page out of airline history. When encountering bad times, retreat back to your core markets.

  6. While NK is struggling to figure out who it will be, let’s remember that they intended to merge with F9 first and it was B6 that came into the process and outbid F9 for NK’s hand.
    Now that the feds have stopped that process – for now – both B6 and NK are trying to figure themselves out.
    Given the news last night that Carl Icahn thinks that B6 is undervalued and has now bought just under 10% of JBLU stock, there is a fairly significant part of the industry that is not certain of its future. The irony is that Carl Icahn focused on legacy carriers in the past and might be seen as a predecessor of some legacy carrier consolidation and yet he is now “playing” in the LCC space.
    Meanwhile, it’s almost Valentine’s Day so about the right time for a northeast winter storm and the associated flight cancellations.

  7. What is the likelihood that Frontier buys Spirit in the next 12 months ? I feel like that was always the merger that made the most sense and perhaps the Spirit shareholders are more comfortable with it. Outside of that, there doesn’t seem to be a path forward for Spirit as a viable business.

  8. With rumors swirling that United might make a play for a warm weather focus city (per Ostrower), I have to think that the sharks smell blood in the water.

    Spirit really can’t ‘hide’ anymore. Any of the 4 Airlines of the Legacy Apocalypse could put a squeeze on NK if they so desired (moreso than they already have with basic economy).

    This will sound crass, but I selfishly want Spirit to stay around to provide YouTube ‘airport fight’ videos.

    1. Cranky, I’d love to hear your analysis of this UA Florida hub rumor….

      I think it’s fascinating. Back during the early idle-fleet days of the pandemic I wrote a blog post arguing for a UA hub at TPA, including potential route maps:

      I also used to think fast-growing Lakeland would be a really interesting option, splitting between the big population centers of Orlando and Tampa (a new DFW).

      But there are good arguments for FLL. Delta has already proven you can build up a hub in a coastal market if your competition is mostly smaller airlines (BOS, SEA), so UA would just be taking a page out of their book to go after Spirit and JetBlue at FLL (both are very weak right now).

      The second reason I’m switching my thinking from TPA to FLL is that UA wants to be a premier airline in wealthy, top-tier markets, and the Miami-FL-WPB metro is much more of a wealth center than TPA (or Orlando for that matter), especially as more and more of Wall Street moves down there.

      The third reason for FLL over TPA is UA needs an East Coast Latin America hub, and a lot of that local demand is focused on the Miami metro area. FLL can play Newark to MIA’s JFK.

      The fourth reason that has not been discussed here so far: how the rise of air taxis might change the equation. With a 100-150 mile range at 100-200mph, they could also feed in traffic from the wealthy lower west coast of Florida from Ft. Meyers to Naples as well as West Palm Beach, Coral Gables, and the Keys. They could really be a game-changer for the local draw zone of the airport, at least for top-tier fliers.

      1. I think FLL has serious capacity issues currently, a hub operation couldn’t fit without United buying Spirit which wouldn’t work in today’s regulatory environment. I kinda still like the TPA idea though.

      2. I think opening a true hub anywhere in Florida would be a suicide mission for United. A focus city, maybe, depending upon what they are trying to accomplish. But what I really think should happen is they and American should buy JetBlue and split it up. American takes New York/Boston and United takes Florida. That’s a whole different issue though, and not one that would pass under this administration.

        I do have a post on Lakeland coming up though.

        1. Totally agree that would make sense, but the administration will never allow it. If something like that did happen, UA should grab a gate+slots at JFK while they’re at it… ;-)

          AA is running 380 flights a day out of MIA, so maybe UA could do half that at FLL if they can get gates and the capacity is available with the SWA pullback. I think that would elevate it just beyond focus city to a small hub offering connections to the Caribbean and Latin America from the Eastern US (where IAH is not geographically a good connecting point).

          Looking forward to that Lakeland post. It really has some potential, although it’s just far enough from Orlando and Tampa that I think it would ultimately struggle to attract locals vs. their well-served much-closer local airports.

          1. 160 daily flights is a LOT of flights. And Fort Lauderdale is an exceedingly busy place. Spirit is there with ample and growing service while JetBlue has put that on the list as a focus point as well. FLL is constrained, and there’s no way United could get the 25+ gates it would need to run that kind of operation.

          2. I have believed for years now that United will setup a TPA focus city. TPA is building a new concourse for a hub carrier, and United has hinted at a new warm weather hub, so the pieces of my conspiracy theory are coming together.

        2. I look forward to your post on Lakeland. I suspect that Lakeland will have difficulty attracting and holding scheduled airline service. They will have the same problem as MLB, but even worse. Most of the service at MLB is to Atlanta and Charlotte hubs, so nearly all trips from there require a hub connection. Meanwhile travelers can often get a nonstop from MCO instead. I live closer to MLB than MCO but fly from MCO because of the nonstop issue, and larger selection of airlines and flights at MCO. (And yes, getting through security at MCO is a painful process.) Lakeland will have to compete with both MCO and TPA. [Avelo is reportedly coming to Lakeland.]

  9. If Spirit dies, I’ll miss the Big Front Seat. Extremely unique offering, and a great value on longer domestic flights when it was available.

  10. Armchair CEO here — I think Spirit had a better business plan pre-COVID. Post-pandemic it shifted to an extreme Allegiant-esque model (Vegas and Florida-centric), which Brett explained nicely and away from VFR P2P between major cities.

    Using San Diego as an example, I could fly nonstop at least once or twice a day from ORD, IAH, DFW, DTW, LAS and, IIRC FLL. Now all roads lead to LAS (aside from intra-CA flying). Meanwhile, Frontier has jumped in with flights to its hubs that allow it to serve a wider audience.

    I’d love to see Spirit return to connecting major cities versus a sole leisure focus that’s all-in on Florida, Vegas and the Caribbean, which ties uncomfortably close to vacation whims.

    1. Just saw a CNBC video on Spirit’s history & their peak was in 2011, but the wings started coming off in 2019. When the pandemic hit things really started going wrong for them & that was when Frontier attempted to buy them as we all know. Then of course the JetBlue saga occurred with the court denying the merger.

      When the denial of the merger was announced, SAVE shares dropped 47% as a deal was predicted. Ironically this ruling may cause the result that it was intended to prevent, Spirit’s bankruptcy & ultimate liquidation. The assumption by Wall Street now is that Frontier & or JetBlue will buy the assets in the end.

      1. Truthfully the best thing would be for NK to be carved up among existing competitors who can use the planes and crews to shore up their relative weaknesses.

  11. To build off some of the earlier comments on potential pivot paths for NK/SAVE, there appear to be many and perhaps this Earnings Release call was too early for them to have thought thru all of them.

    1. Network Type – Point-to-Point vs Hub-&-Spoke?

    2. Hub Location – Coastal vs Central?

    3. Hub Location – Which large US MSA?

    4. Service Offer – Ala-carte vs Bundled?

    5 Mix Offer – Increase BigSeat# and reduce CrampedSeat#?

    6. Balance Sheet – Convert which Fixed Assets to Cash?

    Seems like a return to their pre-COVID strategy would be most likely.

    I’m hoping for a new Service Offer that is more similar to their narrow-body only peers in WN/B6/AS as this would reduce the entire argument around the DOJ B6/NK M&A that Spirit has a unique Service Offer that would have been eliminated by B6 and thus cause Consumer Harm. Its like the DOJ and Courts defined a unique Relevant Market for ULCC seats as compared to LCC seats and Big3 seats.

    A high risk:reward strategy would be to attack the Fortress Hubs and then cry to DOJ when Big3 retaliate. They seem to be the darling of the DOJ and the Courts and the concentration metrics at Fortress Hubs all appear to me to be deep into the normal HHI Anti-Competitive zones.

    Its not clear to me if current management team can pivot NK/SAVE and any pivot will require Fixed Assets be converted to Liquid Assets.

    Perhaps the Board is first looking for a new management team….or at least an “exploring Strategic Alternatives” project?

    Perhaps CF could do a Pre (B6) to Post (WN) fare comparison for his local LGB and see what happens when literally all the gates and slots of an airport shift from one Carrier to another Carrier as the Service Offer and Network Offer of B6 and WN are radically different and simply illustrate the outcome of a “better plan” or “better strategy-&-tactics”.

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