How Spirit Airlines Plans to Take Over America

MIRAMAR, Fla. ( TheStreet) -- A quick look at Spirit's ( SAVE) route map and a review of its fleet plan leads to one conclusion: Spirit plans to take over the U.S.

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.

Other top Spirit cities include Fort Lauderdale, Fla.; Detroit; Chicago; Atlantic City, N.J.; and Las Vegas, a compendium of leisure destinations with other carrier's hubs. In July alone, Spirit has announced new service from Minneapolis to three cities and from Dallas to eight cities.

A unique fare structure, which includes rock bottom fares and fees for nearly everything including carry-on bags, means that Spirit has not endeared itself to everybody. Often, bloggers and some travel writers are highly critical.

But Baldanza said: "Competitors don't like our prices and elitists in the media don't like that we unbundle."

Added Biffle: "If you talk to the vast majority of our upwards of 10 million passengers, they save money, stay in a nicer hotel, and eat a better dinner because of our low fares. We save millions of dollars a year. They like us."

On Tuesday, Spirit reported that in the second quarter it beat estimates and posted an operating profit margin of 16.3%.

"Some people have been concerned that Spirit is going into big city markets and competing against big carriers and could jeopardize their ability to keep margins up," said Imperial Capital market Bob McAdoo.

"Their expansion into DFW shows they can continue to do it," McAdoo said.

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