Apex processes the profitability of over 60 airlines worldwide and captures seat capacity on all scheduled routes operated by airlines based in the United States. This article aims to analyse Spirit Airlines' profitability before and after COVID-19 and discuss its future strategy.
Findings
In the US market, there has been a noticeable shift in traveller behaviour, with passengers expecting more from their base tickets. Legacy carriers have adapted by providing low economy fares with additional amenities, surpassing what Spirit offers in its basic economy fare. As an ultra-low-cost carrier, Spirit has traditionally depended on ancillary fees to remain profitable. After 2019, Spirit showed low positive gross margin only in Q2/Q3 2021 and Q2 2023, but these were well below the industry average, as shown in Chart 1
Furthermore, increased labour costs in 2023 and 2024, an expensive engine recall affecting its A320 Neos resulting in the grounding of part of its fleet, and rising competition from other low-cost operators have severely impacted Spirit's financial performance, culminating in its Chapter 11 bankruptcy filing in November 2024.
Chart 1: Spirit's Gross Profit Margin
Profitability by Market
Looking at the profitability by market, the poor performance in South America is notable even before COVID-19, with the lowest profit margin across all markets operated by Spirit, with a consistent negative performance over the last three years. In 2024, there was some recovery across all markets by the end of the year, but only Central America and Mexico reached profitability in Q4, as shown below in Chart 2
Chart 2: Spirit's Gross Profit Margin by Market
Strategy
To address the changes in the market and evolving traveller expectations, Spirit Airlines' strategy is focused on two main points:
- Passenger Experience Enhancements: Enhancing the passenger experience by eliminating change fees, introducing new fare bundles, and offering amenities and perks like free Wi-Fi.
- Network and Operational Strategy: Redeploying aircraft from low-performing cities to more profitable ones and reducing capacity in all markets. In many cases, this represents the complete cessation of operations, while in others, it involves operating certain destinations seasonally. Chart 3 shows the average gross profit margin of the last three years by country.
Chart 3: Average Gross Profit Margin by Country (2022-2024)
Table 1 shows the reduction in capacity by comparing January to August 2024 with January to August 2025 for each country where Spirit operates. As can be seen, there has been a reduction in capacity in all markets except Jamaica.
For the Peruvian market, there is an increase, but this is because the company only operated in January and December 2024, continuing its operations until February 2025. Operations then ceased until August for its Lima route, which was the only route operated in Peru. Similarly, the cessation of operations for its only route to the Ecuadorian market Guayaquil means that, like Lima, there are no operations planned throughout 2025 until August, which is the last available schedule information. This closure of operations is clearly linked to the low profitability of these two markets, which have been the least profitable markets for the company in the last three years with a profit margin of -45% for Lima and -39% for Guayaquil.
In the case of Haiti, which has been a very profitable route, the suspended route is due to gun attacks on American carriers in November, resulting in the withdrawal of all US carriers from this market. El Salvador, on the other hand, will see a change to a seasonal schedule, stopping in February like Ecuador and Peru but returning during Summer 2025 as a seasonal route.
This shows how the company is trying to reallocate its capacity to more profitable markets and operate on a seasonal basis in some less profitable markets, like South America and Central America, as the data shows.
Table 1: Spirit Seat Capacity Change
Conclusion
Moving forward, Spirit's strategy to enhance passenger experience and optimise its network and operations will be crucial in its efforts to regain profitability and stability in a highly competitive market, with strong competitors that already offer low fares and, in many cases, a much better product. Additionally, the reduction in capacity and the shift to operating seasonally in markets like South America might lead to higher market penetration by the three major carriers in the region, making Spirit's seasonal service less attractive for a market that prefers a more reliable, year-round service.
Moreover, Spirit will need to closely monitor market trends and traveller preferences to adapt quickly and effectively. Investing in technology and innovation to improve operational efficiency and customer satisfaction could also play a significant role in Spirit's recovery and long-term success.
Banner image via Wikipedia
