CEO chat: Spirit Airlines sees recovery taking a 'big move in the right direction' in July
Spirit Airlines is ready to carry all those would-be travelers who, after months of being at home, are eager to hit the beaches in Florida or spend a night out in Las Vegas.
Leisure travelers, the South Florida-based budget carrier's bread-and-butter market, are coming back in a big enough way to allow for a significant return of flying in July. Spirit plans to operate around 550 flights a day next month, or 70% of what it planned before the coronavirus pandemic, CEO Ted Christie told TPG in an exclusive interview.
That makes it a lot easier for would-be travelers to visit the Las Vegas Strip, for example, as with Spirit resumes 14 routes to Las Vegas McCarran (LAS) next month. Austin (AUS), Baltimore/Washington (BWI) and Minneapolis/St. Paul (MSP) are among the Las Vegas routes coming back on line, according to Cirium schedules. In addition, 14 routes to the Caribbean and Latin America are due to resume from Spirit's Fort Lauderdale (FLL) base, barring any changes in local arrival restrictions.
Sign up for the free daily TPG newsletter for more airline news!
"We're starting to see the signals that we were hoping to see as demand broadly speaking, but more importantly in Spirit's segment — leisure, [and] visiting friends and relatives — improves," Christie said. He called the airline's July schedule as a "big move in the right direction."
Spirit will operate one of the most robust domestic schedules among U.S. carriers in July. Compared to 2019, the airline will fly about 86% of what it flew last year — Christie's 70% comment was based off of Spirit's originally planned 2020 schedules — Cirium shows. The number is second only to Allegiant Air that plans to fly nearly 88% of its 2019 schedule.
These robust flying levels reflect Allegiant and Spirit's heavy reliance on leisure traffic, which is widely acknowledged to be returning first. It is also in stark contract to the schedules of American Airlines, Delta Air Lines and United Airlines, which each rely much more on business travelers. The major carriers only plan to fly about 55%, 40% and 38%, respectively, of what they flew in July last year, according to Cirium.
Related: State-by-state guide to coronavirus reopening
Allegiant and Spirit's relatively rapid return to the skies is not a surprise. Wall Street analysts have repeatedly forecast that leisure travelers will begin flying first as fears of COVID-19 ease, leading to a more rapid recovery for the airlines that primarily cater to this market.
Cowen analyst Helane Becker listed Spirit as one of several primarily U.S. domestic carriers positioned to "win the recovery," in a report on June 3. She cited the airline's leisure-oriented network and young, single-family fleet of 151 Airbus A319, A320 and A321 jets at the end of March.
But, this does not mean Spirit can sit back and relax. The airline has tapped its existing sources of cash, as well as issued $175 million in new shares, and accepted $334 million in payroll assistance from the federal government's coronavirus aid package, the CARES Act. In addition, it has moved to keep its already low costs in check.
Related: Check out Spirit Airlines' first jet with its new seats and cabin
Spirit continues to outfit new A320neo deliveries with the updated cabin and new seats it unveiled last fall. However, it has suspend retrofits to planes already in its fleet and has no update on its delayed plans to offer inflight Wi-Fi.
The new cabin fittings highlight Spirit's eye-catching black-and-yellow color palette all the way down to the fabric stitching. The seats add what executives tout as "usable legroom" that aims to make flying more comfortable.
In addition, work on a new headquarters near the Fort Lauderdale airport continues, but the timeline may be delayed in an effort to reduce costs.
Related: Spirit Airlines unveils new seats that it says will make for happier passengers
Efforts to cut costs have not come at the expense of safety onboard. Spirit has doubled down on cleaning the cabins of its aircraft. The carrier is recirculating air through high-efficiency particulate air (HEPA) filters every three minutes, and is requiring all passengers and crew members wear masks onboard.
"We actually think we're in one of the safest environments you could be in, even your home," said Christie.
One thing Spirit is not doing is blocking seats or capping bookings in the name of social distancing. Christie said he believes the combination of cleaning, HEPA filters and masks are "the right way" to approach safety from COVID-19 onboard. However, travelers are allowed to relocate onboard if a flight has open seats.
Related: Which US airlines are blocking middle seats and requiring masks?
The big question for most in the airline industry is how the recovery will play out. J.P. Morgan analyst Jamie Baker has written that an "autumn of discontent" could follow the summer with holiday travel subsiding and many business travelers still grounded. Minimum flight requirements and job protections under the CARES Act expire on Sept. 30 with many expecting a smaller airline industry on the other side.
Asked about a possible decline in demand with the arrival of fall, Christie said Spirit is prepared and would reduce its schedule as it normally does: by cutting flights on off-peak days like Tuesdays and Wednesdays.
Spirit is hedging its bets when it comes to the recovery. While it is ready to flex its schedules down if demand drops again, it could also resume growth above 2019 levels if the leisure-travel led recovery continues, said Christie.
However, he was not willing to "put a stake in the sand" on when he expects Spirit to recover to last year's schedules.
Related: Global air travel won't return to pre-coronvirus levels until 2023, IATA predicts
In terms of growth, Spirit still has 10 A320neos due for delivery this year and another 26 in 2021, its latest fleet plan shows. In May, airline executives said Spirit was in "discussions" with Airbus about deferring some of these new jets. Christie reiterated this statement without providing further details.
Spirit was also due to take 11 new A320neos from aircraft lessors this year and next, according to an end-March financial statement.
However the carrier adjusts its delivery schedule, it does not appear ready to slash the number of new jets to zero.
"Prices stimulate activity," said Christie. "It is our view that the recovery itself will come at the lowest fare option" and in the leisure market where Spirit is strong.
Related: Spirit Airlines moves operations center inland to Nashville
This is the second in a series of interviews with airline CEOs on how they are navigating the recovery from the coronavirus pandemic. Read the first installment with Cape Air.
TPG featured card
at American Express's secure site
Terms & restrictions apply. See rates & fees.
| 4X | Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 4X | Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 5X | New! Earn 5X Membership Rewards® points on prepaid hotel stays booked through AmexTravel.com or the Amex Travel App. |
| 3X | Earn 3X Membership Rewards® points on flights booked through AmexTravel.com, the Amex Travel App, or purchased directly from airlines. |
| 2X | Earn 2X Membership Rewards® points on prepaid car rentals booked through AmexTravel.com or the Amex Travel App and cruises booked and paid through AmexTravel.com. |
| 1X | Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases. |
Pros
- Valuable dining and food-related credits
- Flexible rewards with airline and hotel transfer partners
- Multiple travel and purchase protections
- No foreign transaction fees
- Access to Amex Offers for additional savings (enrollment required)
Cons
- Not as useful for those living outside the U.S.
- Some may have trouble using Uber and other dining credits
- You may be eligible for as high as 100,000 Membership Rewards® Points after you spend $8,000 in eligible purchases on your new Card in your first 6 months of Card Membership. Welcome offers vary and you may not be eligible for an offer. Apply to know if you’re approved and find out your exact welcome offer amount – all with no credit score impact. If you’re approved and choose to accept the Card, your score may be impacted.
- Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
- New! Earn 5X Membership Rewards® points on prepaid hotel stays booked through AmexTravel.com or the Amex Travel App.
- Earn 3X Membership Rewards® points on flights booked through AmexTravel.com, the Amex Travel App, or purchased directly from airlines.
- Earn 2X Membership Rewards® points on prepaid car rentals booked through AmexTravel.com or the Amex Travel App and cruises booked and paid through AmexTravel.com.
- Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases.
- Pay It® lets you tap in the American Express® App to quickly pay for small purchase amounts throughout the month and still earn rewards the way you usually do. Plan It® gives you the option to split up big purchases into equal monthly payments with a fixed fee. You’ll know upfront exactly how much you’ll pay.
- Updated! $120 Dining Credit: Earn up to a total of $10 in statement credits monthly when you pay with the Gold Card at Grubhub (including Seamless), Buffalo Wild Wings, Five Guys, The Cheesecake Factory, and Wonder. This can be an annual savings of up to $120. Enrollment required.
- $100 Resy Credit: Get up to $100 in statement credits each calendar year at over 10,000 qualifying U.S. Resy restaurants after you pay for eligible purchases with the American Express® Gold Card. That’s up to $50 in statement credits semi-annually. Enrollment required.
- $84 Dunkin' Credit: Earn up to $7 in monthly statement credits after you pay with the American Express® Gold Card at U.S. Dunkin’ locations. Enrollment required.
- $120 Uber Cash on Gold: Enjoy up to $120 in Uber Cash annually with your Gold Card. Just add your Card to your Uber account and you'll get $10 in Uber Cash each month to use on orders and rides in the U.S. when you select an Amex Card for your transaction.
- New! As an American Express® Gold Card Member, you can enjoy complimentary Hertz Five Star® Status. Enjoy benefits like skipping the counter at select locations, adding an additional driver at no additional cost*, and vehicle upgrades**. Benefit enrollment and Hertz Gold+ registration are required. *Additional drivers must meet standard rental qualifications and must be a spouse or domestic partner to qualify as complimentary. Other additional drivers subject to fees. **Benefits are subject to availability and vary by location. Additional Hertz program Terms and Conditions including age restrictions apply.
- Take advantage of a $100 credit towards eligible charges* at over 1,300 upscale hotels worldwide when you book The Hotel Collection through AmexTravel.com or the Amex Travel App **. *Eligible charges vary by property. **The Hotel Collection requires a two-night minimum stay.
- Book your travel through the Amex Travel App with added peace of mind – backed by American Express® service and support. Only for American Express® Card Members.
- Whenever you need us, we're here. Our Member Services team will ensure you are taken care of. From lost Card replacement to statement questions, we are available to help 24/7.
- No Foreign Transaction Fees.
- Annual Fee is $325.
- Terms Apply.