Spirit Airlines Is the First Wi-Fi Enabled Ultra-Low Cost Carrier in the Americas
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Inflight Wi-Fi has become nearly ubiquitous in the US since American Airlines first debuted it 10 years ago on transcontinental runs. According to a recent study by Route Happy, US carriers offer Wi-Fi on 85% of available seat miles. Though JetBlue and Southwest offer inflight connectivity on 100% of their fleets, Wi-Fi has evaded the true US low-cost carriers — until now.
Today, Spirit Airlines announced it will be the first ultra-low-cost carrier in the Americas to Offer Wi-Fi. And true to its disruptive nature, they plan to do things differently, ambitiously, and — in their opinion — better. Spirit has selected Thales for its high-end Ka-band HTS (High Throughput Satellite) system on board the aircraft. According to the airline, “The technology will bring Spirit Guests high-speed web browsing and streaming experiences similar to what they would find at home.”
Spirit is renowned for its a la carte, or as they dub it “a la smart,” unbundled approach to pricing, with an emphasis on price sensitivity. The as-of-yet unnamed gate-to-gate service will average a price of $6.50, with a cost elasticity expected to be lower or higher based on the route and demand.
Spirit’s Wi-Fi is projected to provide service coverage immediately for 97% of Spirit’s network upon entry into service, with the exception of its deep Latin American routes. In 2021, the launch of a new satellite, dubbed SES-17 operated by SES and built by Thales Alenia Space, will increase speeds and coverage to 100% of the airline’s current route network. JetBlue and Southwest’s products don’t have coverage beyond the contiguous United States.
The Fort Lauderdale-based carrier is pursuing an aggressive schedule to begin rolling out the new service beginning in fall 2018 with full fleet completion by summer 2019.
“We’re going to move to a maintenance schedule to move as quickly as we can without sacrificing fleet utilization,” Ted Christie, president and chief financial officer and incoming CEO, told TPG.
All of this connectivity comes at a price. “[the average cost of] getting the kit on board, the hardware cost for a Ku or Ka-band satellite connectivity solution is typically pegged around $200-250,000,” Passenger Experience Expert, Seth Miller of Pax-Ex Aero says. “There are other costs for the install, including Aircraft On Ground lost revenue time.” This doesn’t include heightened costs associated once the system is installed, such as additional fuel burn caused by the weight of the routers, antenna and aerodynamics penalties.
So how will ULCCs so vigilant on costs such as Spirit pay for a product that, according to Route Happy’s Jason Rabinowitz, “averages a take-up of 10% of a typical flight’s passengers give or take”?
Though Christie refuses to disclose terms of the deal, reading between the lines suggests Thales, not Spirit, is bearing much of the risk and the cost. “We’ve been evaluating onboard entertainment or Wi-Fi for a while, and one of the challenges in trying to find somebody that could do it that was consistent with the way Spirit runs its business,” Christie said.
“This is a partnership. You can think of it just like our catering product” (The caterer consigns catering to Spirit), “and that will be run as an independent business. Wi-Fi is not going to attack our cost structure. It’s going to add more revenue. It’s going to make the guest experience on board better and that ticked all the boxes for us,” he said.
When asked if Spirit will use this new platform as a revenue generator from other revenue streams such as advertising or pre-loaded content, Christie is noncommittal. “These are things that we will be exploring, and if there is demand for that kind of stuff, but the core product itself is the high speed, high availability Wi-Fi.”
Unlike mature connectivity competitors from Viasat, Panasonic and Gogo, The Thales HTS product does not yet exist in commercial service. It has been in testing on an Air Canada 737 MAX, though Spirit appears to be its launch customer in regular commercial service.
Miller, the passenger experience expert, waves off concern about this, however. “Given the satellite contracts that Thales secured, including both capacity and coverage area, it appears to be a strong choice for Spirit Airlines as a vendor,” he says. “It also seems likely that Thales provided a good deal on the contract, given it is essentially a new entrant in the market again, even with the United and JetBlue aircraft currently under contract.”
One drawback to Spirit’s Wi-Fi service is that like Southwest, the airline doesn’t offer individual seat USB power, but Christie isn’t ruling it out. “These are onboard kinds of products that we always look at and evaluate,” he explains. “You want to enhance the passenger experience, but is it also business worthy? And so for now what’s most important for us it to [introduce this new Wi-Fi product], and then we can tweak around that.”
Though ULCC Wi-Fi will be new to the Americas, it’s not without precedent in other parts of the world. Norwegian, Scoot and AirAsia are pioneers in this realm, though their success ranges from opaque to mixed.
Spirit’s new Wi-Fi product comes on the heels of the airline making significant strides in the realm of customer experience and operations – which at one time were unthinkable for an airline known to be anything but customer friendly. This includes performing as one of the top airlines for on-time performance for the past several months, according to the DOT. All Flight Attendants now attend an inflight Guest Training Program in partnership with Disney University, which will roll out to the airport customer agents. Spirit has also invested heavily in technology, including its first ever mobile app.
Since our last interview with Spirit’s management team, many questions still linger around the carrier’s future, especially as legacy carriers encroach on its low-fare, unbundled turf with Basic Economy offerings — combined with ever-escalating oil prices and new labor agreements that have savaged margins. At the conclusion of the interview, we posed a few more questions to Christie around some hot topics with the carrier.
Spirit has introduced long-haul domestic transcon flying such as Ft. Lauderdale (FLL) to Los Angeles (LAX) and Seattle (SEA). When queried about joining the transcon fray, particularly New York to Los Angeles (LAX) and San Francisco (SFO), the incoming CEO dismissed that for the time being as “markets already well served.” Clearly, lack of slots, gates and optimized aircraft make this lucrative market more of a challenge for Spirit to disrupt.
Questions about adding Hawaii to the network were met with similar responses. Southwest is entering this saturated market, while ULCC leisure carrier Allegiant has exited it.
“Up until the release of the A321neo, we couldn’t even get you to Hawaii,” Christie said. “So that was that not even worth a discussion. Hawaii right now looks like it has lots of competition in there. Where we’re at our best is flying between large cities and from large and and mid-sized cities to leisure destinations. Near-field international destinations principally around the Latin American community where we have a national franchise is also very core.”
Spirit has long been rumored to be evaluating aircraft in the 100-150 passenger range, and Christie concedes that “the A319 is a great airplane for us today, but obviously it’s starting to age and will eventually be removed from the fleet.” As for smaller CSeries and Embraer E-Jet products, the airline is continuing to evaluate them on “the basis of how they could deliver our cost structure for the appropriate length of time from wherever the market is,” the CEO said. “Now, coupled with that is additional fleet complexity and all those other things, which are natural offsets to that. So it starts with the planning exercise and then becomes a financial exercise.”
Finally, all airlines are facing the headwinds of upwardly spiraling oil prices, now more than $70 a barrel. Christie says Spirit is not caught off guard.
“We’ve already started to adapt by changing pricing,” he said. “Then you take a hard look at your network and make sure that the airplanes are positioned in the right places given that the variable expense of fuel is considerably higher than it used to be. And usually what that means is longer haul flying is not quite attractive as it used to be. Then you think about your overall capacity growth. We set our fourth quarter growth to be a little less than we indicated. That’s the way Spirit is going to adapt to a higher costs and I suspect other airlines will do the same.”
Chris Sloan is an aviation journalist and lifelong AvGeek based in South Florida, where he is managing editor of Airways Magazine. At his day job, he is also owner of one of the nation’s top television production companies, design, and marketing agencies, 2C Media. His mantra is pretty much the same as the classic Delta Airlines slogan: “I Love to Fly, and It Shows.” His specialties are inaugural flights and financial analysis.
Featured image courtesy Thales.
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