AVIA 444 LIBERTY UNIVERSITY Outline A Vaticination of Spirit Airlines _2024.pdf

Outline: A Vaticination of Spirit Airlines

In addition, it is important to understand the geographical locations within Spirit’s scope

of operations and their targeted customer base. Spirit airlines used to be a healthy, vibrant, and

profitable organization. Today, they are plagued by the cancelation of flights, customer

dissatisfaction, and other factors that are essentially out of their control. One of the major factors

affecting corporations and individuals is largely attributed to inflation and elevated labor costs. It

is important to peer into their entire scope of operations from assets to the number of employees

currently working for this airline.

Discussions will include future projection for the airline industry. Whether Spirit airlines

will be in business in the years ahead depends on many circumstances, and this body of work is

an attempt to determine if that will come to fruition.

(Singh, 2024) Because Spirit airlines is a publicly traded company it is important to highlight the

profitable. (Spirit Airlines-Stock Price History/SAVE, n.d.) Possible solutions for the recovery of

Spirit airlines will also be discussed.

Spirit Airlines, Inc. provides airline services while also offering hotels and rental car

and the Caribbean. As of December 31, 2023, the company operated a fleet of 205 Airbus single-

aisle aircraft of which we will be discussing shortly. The company was formerly known as

Clippert Trucking Company and changed its name to Spirit Airlines, Inc. in 1992. Spirit Airlines,

Inc. was incorporated in 1964 and is headquartered in Miramar, Florida. (The Complete Toolbox

Spirit Airlines have a unique business model where they focus on being the most

affordable carrier with a few caveats. If an individual is looking for no frills, basic, point A to

point B, solution Spirit can certainly accommodate. However, it must be determined what the

cost of an actual ticket entitles the customer to, which will be discussed later.

cannot without losing capital. Spirit predicted that many base fares are not within the grasp of a

large customer segment who typically cannot afford frequent air travel. Spirit hypothesized that

if it could sufficiently lower its cost base, it could serve this segment without any real

competition and remain profitable.

Spirit’s operating model focused on maximizing asset utilization and non-ticket revenues

per passenger to reduce the impact of charging base fares which would ultimately stimulate

passenger demand that most airlines just cannot serve profitably. Airlines are inherently high-

regulating the variable costs associated with using those assets. For the single fleet type, they

avoided the increased costs of training crews to operate multiple models of aircraft and that

policy ensured that flight crews and maintenance crews could be interchangeable across their

organizational structure. Areas such as maintenance, operational support, and spare part

inventories are greatly simplified versus competitors with more complex fleets operating several

aircraft models.

Spirit sought adjustments to its aircraft fleet to allow for a twenty percent higher increase

in seat capacity on average versus its competitors with similar aircraft. In the maximization of

routing, Spirit’s average daily aircraft utilization is 12.7 hrs. For comparable carriers such as

baggage handlers and support personnel. All of which helps to increase fuel efficiency where

fuel and oil prices are the largest operating costs for a typical airline. The additional weight of

luggage greatly affects the amount of fuel burned during flight operations and any measure that

can be taken to help reduce these costs is always helpful to the bottom line.

Spirit charges passengers ten dollars for boarding passes printed and processed by the gate

agent and temporarily introduced two-dollar charges for passengers who printed boarding passes

at kiosks at the airport. This policy was implemented to influence passengers to print their

employees for processing duties.

Spirit created passenger demand through lower-based ticket prices while offering many

additional products and services designed to maximize non-ticket revenue per passenger. Spirit

even developed a subscription service to access flash sales of nine-dollar ticket fares, third-party

traveler insurance, pre-flight seat selection, third-party travel packages often found from a travel

agency, in-flight products such as peanuts and soft drinks, and the always profitable on-board

advertising. They were remarkably successful, growing ancillary revenues per passenger from

just five dollars in 2006 to an increase of fifty-five dollars in 2014.

All these measures implemented in their business model allowed for the result of Spirit’s

save this company?

company is worth is needed. Determinations must be made on how much debt has been accrued

versus the asset's valuation is important in determining options Spirit has in the future airline

According to the New York Stock Exchange, Spirit Airlines stock price is trading at four

dollars and eighty-five cents ($4.85) pers share as compared to March of 2023 where their stock

was seventeen dollars and five cents ($17.05). A twelve dollar and twenty cent loss in just one

twelve-month period. In 2020, just five years previous, Spirit stock price per share was an eye

popping fifty-four dollars and twenty cents ($54.20). A considerable loss in consumer confidence

over the past forty-eight months of operation.

As of March 8, 2024, Spirit Airlines has a net worth of roughly half a billion dollars

Billion) and this debt will mature at the end of this fiscal year. Spirit has a total deficit of six

would not be good for the U.S. economy and for the families that depend on this airline to make

ends meet.

From 2017 through 2022, Spirit increased its number of employees from over six

thousand (6.1 thousand) to twelve thousand (12.03 thousand) in just six years. This is interesting

as it clearly goes against the established business model of or keeping labor and maintenance

costs down to compete as an “ultra-low-cost carrier”. Could this be the reason for the lack of

Spirit employs thirty-three hundred pilots. They have fifty-seven hundred flight

attendants, and around thirty-one hundred maintenance and other personnel in the pay role.

Certainly, the increase in wages has contributed to the profitability of Spirit Airlines but other

factors have caused issues that are largely out of the control of managers at Spirit. For example,

the engines on the new Airbus aircraft flown by Spirit.

The problem is specific to PW1100G-JM engines manufactured between 2015 and 2020 and

fitted to A320N family aircraft such as Spirit flies, with the engine manufacturer warning that

minute amounts of contamination were present in the metal used in the engine's high-pressure

turbine discs. Consequently, the engines need to be taken out of service and inspected for

Solutions For Recovery

The solution for Spirit Airlines' recovery will depend on whether they can refinance the

six-billion-dollar debt they have accrued over the past four years. As of late, there hasn’t been a

whole lot of interest from those in a financial position to make this nightmare disappear. Spirit

has not turned a profit since 2020 which was the last time it’s stock price was trading at ten times

The current C.E.O. of Spirit Airlines, Ted Christie, has a vision and plan. His solution

included refocusing their attention on domestic ticket sales which have helped their earnings in

2024. However, the issue of maturing debt still plagues the company. Spirit has a long way to go

before they are out of the woods finically but at least they are heading in the right direction.

The possibility of a merger with JetBlue was deemed illegal by the United States

Department of Justice early this year making any type of merger a real impossibility. Since all

airlines are subsidized by the Federal government Spirit will have to rely heavily on this program

to stay afloat in the days ahead. The option of liquidation would eliminate the debt and satisfy

investors with some return on their money but that is not the desired outcome because that would