Spirit Airlines, the “Bare Fare Carrier,” expects to tweak and improve its operations as the airline industry continues to evolve. That’s the message delivered by new CEO Bob Fornaro, who spoke publicly for the first time Tuesday during Spirit’s fourth-quarter earnings call.
Fornaro said Spirit will continue its hub-to-hub scheduling. But as lower fuel prices influence the major carriers to drop fares and compete with Spirit’s ticket prices, the CEO said his airline might consider expansion into smaller and mid-size markets.
“I don’t see a change in those (hub-to-hub) markets,” Fornaro said. “(The strategy) produced very good results and still produces very good results … Going forward we will be much more open to a broader view of routes. We will be just as focused on midsize markets. I think we will be less predictable going forward … in the way we pick routes.”
Spirit went into 2015 with an aggressive plan to expand its carrying capacity by 30 percent. This year, the plan is to expand by 20 percent and Fornaro said that 15 to 20 percent will probably remain as the yearly growth goal.
Spirit reported strong earnings each quarter of last year and overall revenue improved 9.6 percent to $519.8 million. However, the company’s stock fell nearly 50 percent in 2015. Shares were up as much as 10 percent Tuesday after investors heard the comments from Fornaro, who has been on the job about a month.
Spirit has challenged the legacy airlines by charging passengers for any and all extras beyond air fare. Checked bags don’t fly free. Neither do carry-on bags. There’s also a charge for premium seats and advance seat selection. (So far, no charge for use of the tray table or reclining your seat.)
The no-frills approach allowed Spirit to increase its non-ticket revenue per passenger flight segment from $5 to $55 from 2006 to 2014.
Planning For The Future
Fornaro, who was previously at AirTran, emphasized that Spirit will need nimble planning to face the future.
“We’ve got a fleet plan that will take us in excess of 100 airplanes in a couple of years,” he said. “We have to make sure operational planning is in sync with the fleet plan, rather than being behind.
“We need to get ahead of things. As we go to airports, we are generally the last person in the airport with the worst gates … We need to put together plans before the fact rather than after the fact.”
Other important takeaways from Fornaro:
- Spirit will work on improving operational reliability, particularly in terms of luggage handling and on-time arrivals/departures.
- It will attempt to slightly reduce aircraft utilization, which is now at 12.5 hours a day.
- The airline will increase the number of spare aircraft and increase crew management staffing levels so crews are available when they are needed.
- Improving customer service/satisfaction is important. “I think if we can provide low fares with a positive reputation, it will be good for business,” Fornaro said.
For those who prefer to drill down into quarterly reports, here is The Wall Street Transcript’s investor update on Spirit.