Spirit's profits Soar, a sign of things to come with UA
 

OK most FTers will say Spirit is the airline to Hate, and they would never set foot on it. Yet it seems everyone else is and paying their fees as well.

Almost a day doesnt pass with a new thread bashing UA for raising or implementing a new fee.Yet its the fees that is making Spirit so successful. OK they have only 50 planes, but it seems people love the a la carte pricing and only paying for those things they actually need

If Spirit is so successful while AA,DL,UA are having its problems Im wondering if we are in store for alot more of Spirit pricing policy as we move forward coming out of UA

Ryanair and easyjet make money too.

So does SQ.

None of those carriers pretend they're something they are not. United is two-faced. On the one hand, they claim to be a premium carrier, on the other, they say they won't lose customers based on fare. All the while, offering a substandard onboard soft product (see domestic F offerings..).

SQ is quite clear that they are a premium carrier, and they act like it.

Spirit says they're a cheap airline, and if you want anything more than your butt in a seat going from A to B, you'll pay extra. I have no problem with that model.

I have flown Spirit several times between ORD-DTW and ORD-ACY. I book the first row with the big seat, (first class with nothing free) but it's still better than flying a crj200.

This does appear to be the direction. Unbundling and al-la-carte pricing has been a global theme for a while now. UA is jumping on the bandwagon, albeit in a very sloppy and inconsistent way.

Not sure what you base that comment on.

People love low prices. They hate the nickle & dime routine. They tolerate the nickle & dime routine as long as they still think they are getting the lowest total price (even if they may not).

It's a slow decline to that level but, count on the fact that they are all still, nominally, in competition for business travelers which expect a lot more service. The legacies can make their plays, somewhat in concert with each other but they will make breaks here and there trying to scoop the competition's elites.

Also, comparing the business models of an airline or any business many many MANY times smaller than the big ones really doesn't play out very far.

This is handled by mapping fees to FF levels. If you're a 1K, either because you flew a lot, or because they gave it to you for free out of a desperate last ditch effort to win back the business that Rainey threw away, then you'll pay fewer fees than a Kettle. Unless, of course, you have the credit card. Then, you're in.

Spirit Airlines CASM is about 10 cents/mile (as of late last year):

http://ir.spirit.com/releasedetail.cfm?ReleaseID=733156

United's mainline CASM is approaching 15 cents/mile:

http://online.wsj.com/article/PR-CO-...tml?mod=crnews

Spirit can make a profit on much lower priced tickets and/or less total revenue per flight mile. So UA can't really go entirely the way of Spirit until their costs come WAY down which is simply not going to happen with the new contracts and aircraft purchases that are coming.

Looking at DTW-DEN-DTW for the summer. Spirit is as low as $166 for the dates I want, while UA is $290. For my MIL (who is a kettle at best), I really don't see how she doesn't come out ahead with Spirit. Even if she pays $25 each for a bag, and other $20 for random stupid stuff, that's still $50-$70 savings.

Spirit has what percentage of the domestic travel market? 1 to 2 percent, perhaps? That's not exactly "everyone else." And Spirit isn't competing with UA/AA/DL. It's competing with Amtrak, Megabus, driving, and staying home for the weekend.

Not only are UA's costs so much higher than Spirit's that they can never adopt Spirit's pricing model, they're not even serving the same market with the same product.

People love straightforward, transparent deals and having their expectations met or exceeded. That's why Spirit and Southwest succeed. People don't like gotcha fees or bait-and-switch treatment, and they don't like setting foot on a global network carrier and being treated like swill -- having their expectations totally unmet. That's why United is not succeeding today.

Agree with Entropy's sentiments... UA is an organization that wants to have its cake and eat it too. On one hand, it claims to try to be a premium airline with Global and Business First, and on the other hand, it tries to earn fees through unbundling and a la carte pricing, supplemented by credit card perks.

The former approach requires premium services and infrastructure that UA seems to be cutting back on, so they are neither here nor there in the soft product or hard product. The LAX/SFO - NYC premium route has been disappointing in how it has apparently ceded to AA and DL.

The latter approach requires a low operating cost approach that UA isn't able to replicate; and their fares don't necessarily reflect the pricing.

I do think a hybrid approach is possible; but it will require a holistic approach that I do not believe UA management has been able to understand nor grasp. They are seemingly taking plays from different operating/business models and slapping it together in hopes that it will generate revenue.

But instead, it is just a dysfunctional, bi-polar airline trying to emulate what works for airlines catering to different crowds.

If you look at their 10K: http://files.shareholder.com/downloa...710/filing.pdf you find that not only are their costs lower, but their yield and per passenger revenue is much smaller than UA's.

Spirit pulled in $218M in passenger ticket revenue, and $151M in "non-ticket revenue" last quarter. On UA (and other mainline carriers) non-passenger revenue is about 15% of passenger revenue.

Spirit does not publish a PRASM number it only gives a yeild and RASM based upon TOTAL revenue. Those are yield = 13.92 c/mi, and RASM = 11.85 c/mi.

While these numbers can't be directly compared to UA (or other carriers who publish the figures for PASSENGER Revenue) UAs figures for this subset of revenue are much higher than Spirits, with a yield of 14.64 c/mi, and a PRASM of 11.92 c/mi. Add back in the 15% extra in revenue UA gets and UA is getting more revenue (but too little, trailing other network carriers).

So Spirit's numbers are lower in revenue and much, much lower in costs. UA could not survive on Spirits revenue numbers, nor will it get its costs anywhere near where Spirits are. And I might add that Spirit is unionized, and their pilot deal expires on 6/2015, expect their costs to go up...

Spirit has the cost structure to make low fares and lots of upsells work. United's cost structure is way too high for low fares.

I always like checking in to FLL airport on Foursquare - where the most liked "tip" by users is "Don't ever fly Spirit - trust me, you'll thank me later".

I've flown them twice, back in 2005. Never again.

Isn't it what they were saying about Southwest 15-20 years ago:D:p;)