For my financial performance discussion of Spirit Airlines, I have reviewed and analyzed several standard airline performance measures from four years at the beginning, and four years after completing the transition to an ultra-low cost carrier (ULCC) strategy. Since the early 90’s, Spirit gradually expanded primarily along the eastern United States and into Latin America. In the years following September 11, 2001, Spirit struggled like many other airlines and was on the verge of bankruptcy, which is when CEO Ben Baldanza began integration of the ULCC concept (Nicas, 2012). By 2011, the transition to low fares and high fees was complete and the airline has experienced rapid growth ever since. Table 1 shown below displays data compiled
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In addition to fuel/maintenance costs previously discussed, marketing is kept cheap through conducting most advertising online via email while selling advertising space in their planes (Nicas, 2012). The aircraft seats are closely spaced with little legroom and no ability to recline, allowing more paying passengers per flight. Fees are applied to virtually every extra convenience, from having a boarding pass printed at the airport or the ability to choose one’s seat, to a charge for water as well as each checked or carry-on bag (which not only generates revenue, but discourages passengers from taking lots of luggage, thereby saving weight and fuel) (Carey, 2011). As of 2015, Spirit’s market share in the United States was just 2.5% (nearly 7 times less than Delta Airlines’ 17% market share) while their bag revenue at $215 million (ranked fifth highest of all U.S. carriers) was almost a full third of Delta’s ($661 million, highest of U.S. carriers). Fees make up approximately one third of Spirit’s total annual revenue (Nicas, 2012).
Changing to the ULCC business strategy enabled Spirit Airlines to transform from a struggling, loss-generating carrier to the leading American value-focused airline in just a few years. This rapid growth has also pleased investors, as the company’s stock has increased approximately 250% since its IPO in 2011 (and at its high at the beginning of 2015 was double that). Based on the available data along with the recent drop in oil prices, it appears likely that Spirit’s expansion will
In addition to fuel/maintenance costs previously discussed, marketing is kept cheap through conducting most advertising online via email while selling advertising space in their planes (Nicas, 2012). The aircraft seats are closely spaced with little legroom and no ability to recline, allowing more paying passengers per flight. Fees are applied to virtually every extra convenience, from having a boarding pass printed at the airport or the ability to choose one’s seat, to a charge for water as well as each checked or carry-on bag (which not only generates revenue, but discourages passengers from taking lots of luggage, thereby saving weight and fuel) (Carey, 2011). As of 2015, Spirit’s market share in the United States was just 2.5% (nearly 7 times less than Delta Airlines’ 17% market share) while their bag revenue at $215 million (ranked fifth highest of all U.S. carriers) was almost a full third of Delta’s ($661 million, highest of U.S. carriers). Fees make up approximately one third of Spirit’s total annual revenue (Nicas, 2012).
Changing to the ULCC business strategy enabled Spirit Airlines to transform from a struggling, loss-generating carrier to the leading American value-focused airline in just a few years. This rapid growth has also pleased investors, as the company’s stock has increased approximately 250% since its IPO in 2011 (and at its high at the beginning of 2015 was double that). Based on the available data along with the recent drop in oil prices, it appears likely that Spirit’s expansion will