What’s Spirit Airlines Business Model?
Spirit Airlines, Inc. owns and operates airlines. The Company provides travel opportunities principally to and from South Florida, the Caribbean, and Latin America. Spirit Airlines offers travel insurance, onboard beverages and snacks, vacation packages, carry-on and checked baggage, online booking, and other services.
What Spirit Airlines is doing in more details?
Spirit Airlines offers affordable travel to value-conscious customers. Its all-Airbus fleet is one of the youngest and most fuel efficient in the United States. It operates flights between major US cities and popular vacation spots in the Caribbean, and Latin America, serving about 80 destinations in around 15 countries.
The airline operates an all-Airbus fleet of over 155 single-aisle aircraft in the A320 family. Spirit Airlines capitalizes on an ancillary service model, charging separately for baggage, advanced seat selection, and other travel-related upgrades.
In addition to scheduled service, the company partners with third-party vendors to offer a slate of vacation packages via its website. Domestic markets account for the majority of the company’s sales. The company was founded in 1964 as Clippert Trucking Company.
Where Spirit Airlines is Operating?
Spirit Airlines’ operations are divided into passenger revenue and other revenue.
Passenger revenue (almost 100% of net sales) consists of base fares that customers pay for air travel, while non-fare revenue is generated from air travel-related services, such as baggage, passenger usage fees, advanced seat selection, itinerary changes, and loyalty programs.
Other revenue consists of the sale of frequent flyer miles to credit card partners and commissions from the sale of various items such as hotel and rental car bookings.
Where is the geographical reach of Spirit Airlines?
Spirit Airlines’ route network includes over 330 markets served by about 80 airports throughout the US, Latin America, and the Caribbean. Revenue generated from US travel accounts for over 90% of its revenue while Latin America and the Caribbean account for the remaining nearly 10%.
The company’s executive offices and headquarters are located in a leased facility in Miramar, Florida.
It has additional maintenance operations in leased facilities in Fort Lauderdale, Florida; Chicago, Illinois; Atlantic City, New Jersey; Dallas, Texas; Houston, Texas; Las Vegas, Nevada; Orlando, Florida; Atlanta, Georgia; Myrtle Beach, South Carolina; Fort Myers, Florida; and Philadelphia, Pennsylvania.
What is Spirit Airlines’ Sales and Marketing Strategy?
Spirit Airlines’ customers are primarily leisure travelers who are paying for their own ticket (vs. a corporate expense account) and who make their purchase decision based largely on price.
The airline sells through direct channels, including online via www.spirit.com, its call center and airport ticket counters, with www.spirit.com being the primary channel.
It also partners with a number of third parties to distribute its tickets, including online and traditional travel agents and electronic global distribution systems. Over 25% are made through travel agencies and the call center accounts for over 5%.
What is Spirit Airlines Financial Performance?
Company’s revenue for fiscal 2020 decreased by 53% to $1.8 billion compared to the prior year with $3.8 billion.
The decrease was primarily due to a decrease in traffic of 45%, and a decrease in an average yield of 14%, year over year, driven by reduced air travel demand as a result of the impact of the COVID-19 pandemic.
During 2020, Spirit Airlines had a net loss of $428.7 million, compared to a net income of $335.3 million in 2019.
Cash held by the company at the end of fiscal 2020 increased to $1.9 billion. Cash provided by financing activities was $1.7 billion while cash used for operations and investing activities were $225.3 million and $554.0 million, respectively.
What is Spirit Airlines Future Strategy?
Spirit Airlines’ growth strategy includes acquiring additional aircraft, increasing the frequency of flights and size of aircraft used in markets it currently serves, and expanding the number of markets it serves where its low cost structure would likely be successful.
Effectively implementing the company’s growth strategy is critical for its business to achieve economies of scale and to sustain or increase its profitability.
What is Spirit Airlines’ Background?
Spirit Airlines was founded in 1964 as Clippert Trucking Company in Michigan. It began air charter operations in 1990 and was renamed Spirit Airlines, Inc. in 1992. In 1994, it reincorporated in Delaware, and in 1999 relocated its headquarters to Miramar, Florida.