Is Spirit Right To Think It Will Recover First?
Earlier this year, when the pandemic first started its rampage, how it would affect the airline industry wasn’t clear, other than dire predictions of a total collapse. By the late spring, U.S. airlines frequently used the term “green shoots” to describe the early signs of recovery they were seeing in the summer. But by now, early autumn, the picture again is muddled. Airlines schedules and networks change by the month as airlines chase opportunity wherever they can.
But one thing seems to be clearer now: Business travel remains depressed, but leisure travel, especially visiting friends and relatives (VFR), is the strongest part of the industry. The conventional wisdom holds that airlines with strong leisure and VFR networks are best-positioned to bounce back. And by that wisdom, Spirit is among the best-placed airlines anywhere in the world. But is it?
Spirit has many strengths, as we examine in this week’s Feature Story. Its bread-and-butter is leisure and VFR, and it has long experience in serving these segments of the market. It has a simple fleet of Airbus A320s. Its network isn’t heavy in markets like New York and Washington that were hit hard by the virus. Its passengers skew young, and younger people are more likely to travel now. And Spirit generates a large amount of ancillary revenues.
But the picture isn’t all rosy. Before the pandemic, it expanded aggressively, adding more dots to the map. Florida, where it’s based, is in the midst of a Covid outbreak, although recent signs are encouraging that the worst may have passed. The airline placed a large aircraft order right before the pandemic struck, although it has been able to defer some deliveries after negotiating with Airbus. And it’s facing increased competition, as airlines like United, American, and Delta chase the same customers that have long flown Spirit.
But Spirit is confident it can emerge and be profitable. The carrier’s costs remain low, and it says it has long experience competing for leisure customers with carriers like Southwest.
Is Spirit’s confidence misplaced? Much depends on how the pandemic plays out and what travel patterns emerge when a vaccine or better therapeutics arrive. But signs are the conventional wisdom, that airlines like Spirit with a strong customer base and network and low costs, will hold, and Spirit could be among the first airlines to recover.Subscribe Now to Airline Weekly