Spirit Airlines – driving growth to Latin America

Spirit Airlines is based in Fort Lauderdale and brands itself as an ultra low-cost carrier. Its main base is firmly established but it also has three other focus cities - Atlantic City, Detroit and Myrtle Beach.

Source Flightbase 14-20 September 2010

THE SPIRIT AIRLINES DOMESTIC STRATEGY

Spirit is a relatively small carrier in terms of the overall US domestic market, coming in as the 13^th largest carrier in total, with carriers such as AirTran, Frontier Airlines and Republic Airlines offering more domestic weekly seats.

Spirit's domestic network is fairly limited with just 14 US mainland points served, four of which are located in Florida - Orlando, Tampa and Fort Myers to compliment its Fort Lauderdale service.

In the Spirit domestic network, only Los Angeles and Las Vegas are served west of Chicago, linked with Detroit and Fort Lauderdale.

As a base, Fort Lauderdale shows Spirit's focus on leisure market and to a certain degree secondary airports. Here, Spirit is the largest carrier operating 326 weekly scheduled flights, followed by Southwest 278 weekly flights, Jetblue 234 flights, with legacy carriers Delta and Continental fourth and fifth with 208 and 186 weekly flights respectively. Fort Lauderdale is much smaller than its nearest neighbour and main Florida gateway of Miami.

Two if its other focus cities, Atlantic City, the popular gambling resort, and Myrtle Beach, a coastal resort in South Carolina, are both generally served from east coast and Florida airports by Spirit. These are airports without other significant scheduled airline presence.

At Atlantic City, Spirit's only competitor is AirTran, however the carriers do not compete on any route, as AirTran's only route at the airport is a double daily service from its Atlanta base. Spirit has an 88% share of the Atlantic City market.

At Myrtle Beach there is more competition in the shape of Delta and US Airways. Spirit currently has a 35% share of the Myrtle Beach market with US Airways holding 30% and Delta a 22% share. The LCC faces competition on three of its seven routes operated from Myrtle - Delta on Atlanta and Detroit, and United from Chicago.

The exception of its focus cities is Detroit neither leisure nor a secondary airport where Spirit is the fifth largest airline in terms of operated flights, however Delta has an 83% share of this market and Spirit just a 2% share.

Despite its new domestic route announcements, Spirit's key focus is on international markets - in particular, South America.

GROWING INTERNATIONAL NETWORK

Spirit has a growing international network, which it operates with a fleet of A319/A320 and A321 equipment. The entire international network is served from its Fort Lauderdale base and now comprises of the 97 weekly frequencies from the Florida gateway to an impressive 20 destinations within the Caribbean, Central America and South America.

Spirit has a clear focus on Latin America from Fort Lauderdale, which is aimed at tapping into the strong ethnic and leisure demand. It now serves five destinations in Colombia - Cartagena, Barranquilla, Armenia, Medellin and the capital Bogota. It also serves the capital of Peru - Lima.

Its focus on the Colombian markets is no surprise. IATA BSP data demonstrates that between May 2009-10 over 1.9 million passengers travelled between the US and Colombia. Spirit Airlines is the third largest airline in terms of passenger share as the table below illustrates:

Source Flightbase 14-20 September 2010

Spirit is the only low-cost carrier in the leading five airlines in this growing market of 1.8 million passengers in 2008-09 and 1.6 million in 2007-2008, when Spirit offered no non-stop service.

WHY HAS SPIRIT BEEN SUCESSFUL IN LATIN AMERICA?

Spirit has targeted the large traffic flows from North to South as it is easier to target a US-based market than it is for northbound traffic. This strategy avoids high marketing costs, sales and station costs at the destination. There are also large tourism flows that can be wholesaled to travel agents and tour operators, therefore reducing risk on new sectors. The large ethnic population in and around Fort Lauderdale is a driving force for Latin American services, with a huge Hispanic population around the catchment area. Spirit's simple point-to-point network does not require interlining at the US destination end, and the LCC has also benefitted from the fact the legacy carriers have historically made the US to Latin America markets expensive. Spirit's success is based on offering new services and low cost tickets, which are highly attractive to the market.