In Defense of Spirit Airlines

Democratizing air travel through the power of ultra low fares

Lost amidst the Election Day news storm on November 5th was the untimely passing of Ben Baldanza, one of the most consequential commercial aviation industry leaders of this generation. There is arguably no one who can claim to have had a greater impact on bringing ultra low-cost air travel to the US market. Having joined the relatively nondescript and regionally-focused Spirit Airlines in 2005, industry veteran Baldanza rose to CEO and subsequently transformed Spirit in the image of European ultra-discount carrier Ryanair. In so doing, he enabled millions of budget-conscious travelers to fulfill their travel needs and desires without breaking the bank.

The Spirit Airlines approach, often referred to as “à la carte” pricing, requires passengers to pay separately for optional extras such as checked baggage, seat selection, and in-flight amenities. While this can appear to consumers as “nickel and diming,” the flip side is that fares are kept so low and competitive because passengers are not being asked to “subsidize” other travelers by paying for services that they are not using. This innovative and, at times, polarizing strategy led the airline to becoming the butt of late night talk show jokes. “Late Night” host Seth Meyers once quipped, “The New England Patriots have become the first NFL team to buy their own planes to fly to games, while the Cleveland Browns have been downgraded to the overhead bin on Spirit Airlines.”

Spirit’s impact on reducing travel costs is significant. When compared to the overall U.S. domestic average airfare, Spirit's fares are notably more affordable. For instance, in 2023, the average domestic itinerary fare was $382, according to the Bureau of Transportation Statistics, compared to Spirit’s $98 average domestic fare. This may not be entirely apples-to-apples given differences across carries in length of flight and what exactly is included in the fare. However, I have repeatedly found in my own family travel planning that when comparing airfares from my hometown of Boston to leisure destinations in Florida, the Caribbean, and elsewhere, that Spirit nearly always offers not just the lowest fares in the market, but very often has round-trip pricing that is hundreds of dollars cheaper than the nearest alternative.

For many travelers, that kind of pricing that Spirit offers is the difference in being able to attend that wedding or funeral, or take that vacation or business meeting that they simply could not have otherwise. For lower and middle income individuals, families, and small business owners, the impact of highly reduced transportation costs is transformative. In terms of what one gives up for barebones pricing, the truth is these days the difference with legacy US network carriers in reality is not all that great. American, Delta, United, and others, also charge extra on domestic and sometimes international flights for food and beverages, seat selection, wifi, checked baggage, and more. Spirit’s offering provides minimal seat pitch (legroom), however that can also be overcome by those who are interested in paying appropriate up-charges.

Spirit has actually innovated on the service front for those, like me, who appreciate a little bit of extra comfort and space when traveling. Spirit introduced the “Big Front Seat,” which is offered at a steep discount compared to legacy airlines’ domestic first class. More recently, Spirit added rows of seats near the front where passengers can pay 50% extra to guarantee not having a neighbor. As a relatively large guy, I like extra legroom, however Spirit is the only US airline to offer an affordably priced opportunity to actually guarantee enough elbow room to sit and work easily without having to face off with a fellow traveler about who gets to “own” the armrest. 

While critics have argued that the no-frills approach led to diminished customer satisfaction, proponents highlighted how Baldanza's vision democratized air travel, enabling millions of travelers to fly who might not have been able to otherwise. Baldanza remained CEO over many prosperous years in which Spirit boasted industry-leading profit margins until he stepped down in 2016. Sadly, the company’s model began facing headwinds, particularly around operating costs, and has struggled to recover from post-Covid-19 setbacks. 

A few years back, Spirit announced that it was proposing to merge with fellow ultra low cost carrier (ULCC), Frontier Airlines. Shortly thereafter, JetBlue Airways announced that it would outbid Frontier to acquire Spirit. The US Department of Justice (DOJ) opposed this merger on anti-trust grounds. While I understood the need for consumer protection, I actually disagreed with the DOJ’s position on two grounds: 

1. Lack of precedent after the government and the courts previously allowed the mergers of United with Continental, Delta with Northwest, American with US Airways, and Southwest with AirTran. All of these created mega network airlines that are larger today than what the proposed JetBlue-Spirit tie up would have looked like. 

2. Spirit had clearly demonstrated that it was struggling financially and coming together with another innovative, low-cost airline like JetBlue would have created a challenger that ultimately would have been better for consumers than seeing Spirit Airlines die and having its routes and aircraft be quietly divided up among the large incumbents. The DOJ was ultimately successful in having the courts block the merger, and the post-script to that story is that last week, Spirit Airlines filed for Chapter 11 bankruptcy protection. One has to wonder if the DOJ really did act in the best interest of consumers by blocking a merger of smaller players in an industry controlled by a few dominant players.

Now Chapter 11 does not mean that Spirit will necessarily go out of business entirely, though there is certainly a heightened risk that this could occur. Spirit will seek relief from creditors and potentially downsize its operation while cutting costs anywhere it can. To try to understand what Spirit could do to make sure it doesn’t end up in the graveyard alongside the ghosts of so many airlines past, I turned to preeminent airline industry analyst Henry Harteveldt, President of Atmosphere Research.

Henry offered the following:

“As Spirit contemplates its future, I believe the airline needs to start by taking steps to be as reliable and punctual as possible. If an airline isn’t reliable, little else matters. Conversely, when travelers perceive airlines to be reliable, it builds preference and increases their willingness to pay more compared to less reliable airlines.

Spirit’s next challenge is its route network. Yes, there are high-volume routes, such as those between major cities in the northeast and Florida, where Spirit can successfully compete. The airline needs to remember a fundamental element of successful marketing: Find unmet needs and fill them. Spirit needs to identify routes that have little or no nonstop service to the key destinations it serves and determine whether they can profitably serve those routes. A challenge for Spirit is that its low-fare pricing model and high-density seating configurations require them to fill a lot of seats for a flight to be profitable, which may limit which routes they can profitably serve. 

What I hope Spirit doesn’t change is the brutally, radically honest way it presents options to travelers. Unlike one large airline, Spirit doesn’t promise luxury and deliver mediocrity. It provides travelers with a variety of fare and product options, several of which now include features such as a checked bag or assigned seat. What I hope Spirit will do is shift its marketing focus from price to value. As some of Spirit’s larger competitors cut back on their passenger experiences, there are fewer meaningful points of difference between so-called “full service” airlines and Spirit. Our 1Q 2024 survey of US airline passengers shows just 14% of US airlines passengers are loyal to an airline. That means a considerable number of passengers consider their journeys from trip to trip. Spirit needs to find a way to be considered by more people, and then get some of those travelers to try the airline.”

Let’s hope for the sake of consumers and healthy competition that Ben Baldanza’s legacy at Spirit Airlines will remain and allow the carrier to thrive once again.

They say not all heroes wear capes, but some of them do have wings. Fly on, Mr. Baldanza….