If any one airline has had a rough go-around over the last few months, it would be the Miramar, Florida-based Spirit Airlines (SAVE) .
After a federal judge blocked JetBlue (JBLU) ‘s plans to acquire it for $3.6 billion back in January, the ultra-low-cost carrier found itself scrambling to find another way to come out of the cycle of unprofitable financial quarters dating back several years. At the start of May, it reported its 10th consecutive loss — this time, $142.6 million for the second quarter of 2024.
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Each time its executives have answered investor questions over the last year, Spirit has named a number of factors to explain its poor financial performance—rising costs and union negotiations over employee salaries have resulted in heavy cash burn, while a recall of the Pratt & Whitney engines used in Spirit’s Airbus A321neo EADSF planes limited the routes that Spirit can run to bring in customer dollars.
CCO sounds alarm: ‘Less people are actually flying on Spirit’
While it initially planned to start running a flight from Orlando to Tulum’s newly-opened airport in March, the route was delayed indefinitely due to a lack of available Airbus aircraft.
The drop in the number of customers flying has not gone unnoticed by the airline, which has been looking at different ways to poach travelers from competitors. Despite the revenue hit it would incur from making such a change, Spirit recently eliminated the fee to change or cancel one’s ticket irrespective of fare class and raised its checked bag limit from 40 to 50 pounds.
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“What we’ve seen over time is that less people are actually flying on Spirit,” Spirit Airlines Chief Commercial Officer Matt Klein recently told CBS News report Kris Van Cleave in an interview. “So we believe the changes we’re making are about attracting new customers.”
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Spirit says changes are ‘something customers wanted.’ Will they help the airline?
As many airlines are seeing record traveler numbers post-pandemic, the reasons for Spirit’s falling numbers have a lot to do with the availability of choice across the industry. A common complaint about Spirit is that the low base fare on which its ultra-low-cost model is based does not end up being worth it once things like suitcases, seat selection and additional “junk fees” are factored in.
Budget competitor Frontier (FRON) eliminated its own change and cancelation fees by introducing “fare bundles” in which changing the flight is either included or not possible. Spirit, in turn, likely felt compelled to do the same in order to keep drawing in customers who increasingly want not just a low base fare but fewer additional charges.
Klein further told CBS News that such changes, as well as updates to its Spirit Saver$ loyalty program that lets one pay an annual fee for lower fares year-round, is “something our customers wanted.” That said, the issue of attracting from a limited pool of customers competitors also want is a perennial one for airlines and businesses in general — for many years, Spirit had an advantage with the price-conscious crowd but increasingly lost it in the post-pandemic era.
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