How Spirit Airlines Plans to Take Over America
The carrier today has 42 A320 family aircraft and plans to take 68 more by the end of 2015. Beyond the 68, it has 75 more on order. However, it has 28 aircraft on lease and could return some, meaning it could take 40 between 2016 and 2021. In other words, Spirit should have about 160 aircraft in 2021, four times its current fleet size.
In general, the number of revenue passenger miles, a metric that measures the number of miles traveled by passengers, is growing at the same pace as capacity: Whenever Spirit adds capacity, it adds passengers at the same rate.
Currently, Spirit is in the midst of rapid expansion in Dallas, where it currently flies to 15 cities, most recently added, and has announced plans to serve 11 more.Asked in an interview whether Spirit will become a national airline, CEO Ben Baldanza responded: "We already are a national airline. We serve over 84% of the population base. We're everywhere." Realistically, Spirit has more ground to cover. Speaking about the route map on the carrier's second-quarter earnings call on Tuesday, Barry Biffle, chief marketing officer, said, "We've announced a lot of new cities recently. Now that we have bases, we can connect a lot of those dots. You're starting to see a lot less white space on the map as we do that." Surprisingly, Spirit's growth, which totaled 16.5% in the second quarter, comes at a time when the domestic industry is contracting. In fact, one of the surprises in today's airline industry is that start-up carriers are few and far between, even though capacity is shrinking. The industry has contracted to just four legacy carriers, two large regional carriers, and two low-fare carriers, JetBlue (JBLU) and Southwest (LUV). They are Spirit's true competitors. Like low-fare carriers throughout recent history, Spirit has had to devise an approach to dealing with the legacy carriers. In Dallas, which is the largest hub for American (AAMRQ.PK), "we serve the markets with generally one to two flights," Baldanza said. "We have competed with American for a long time here in South Florida. They know we're not chasing their business customers. We are creating a bigger market in Dallas than would otherwise be there." Again, a look at the map indicates how important Dallas has become to Spirit. Baldanza noted that only three cities in the Spirit system lack flights to Dallas. For the moment, he said, just 10% of Spirit passengers connect between flights, but obviously that number will increase.
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