Spirit Airlines’ Plan for a 2020 Rebound Includes Charging for Larger Seats

(Bloomberg) -- Since taking the reins at Spirit Airlines Inc. this year, Ted Christie has overseen a 38% share decline and a deteriorating financial outlook. But just wait for next year as the discounter steps up efforts to squeeze more revenue out of travelers.

“Nobody’s satisfied with the performance to date and I am certainly among that group,” Spirit’s chief executive officer said in an interview Monday at an airline conference in Los Angeles. “We haven’t deployed all the products that we wanted to deploy” in 2019, such as new ways to sell on-board perks such as seat assignments and baggage charges.

The effort to increase non-ticket revenue is poised to gain momentum in 2020 as the carrier begins pushing sales of ancillary items such as access to larger seats, along with vacation products like hotel rooms and show tickets. That sales category is already growing faster than fare revenue, and the initiatives for next year provide “cause for optimism,” the CEO said.

The shares fell 2.5% to $36.14 at the close in New York after the company cut its financial outlook late Sept. 6, the second reduction since July. This year, Spirit has tumbled the most among U.S. airlines with a market value of at least $1 billion.

Leisure Weakness

Spirit said fares over the summer proved weaker than expected, echoing similar comments last week from JetBlue Airways Corp. Both airlines, which cater primarily to leisure travelers, also cited the financial fallout from Hurricane Dorian. Spirit canceled 768 flights due to the hurricane, which contributed to a $25 million sales hit.

For the third quarter, Spirit said total revenue for each seat flown a mile will drop as much as 3.5%, compared with the previous forecast of a decline of no more than 2%.

While investors “are obviously frustrated in the performance of the stock, I share their frustration,” Christie said. “They like the model, they like the opportunities that are before us and they want to see us deliver.”

Christie spoke at the Airline Passenger Experience Association conference, where Spirit introduced new seats it’s introducing to its fleet over the next few years. The first seats will come in November on a new Airbus SE jetliner, with about six planes expected by year’s end. Spirit will also retrofit some aircraft and eventually finish its entire fleet over the next several years, Christie said.

Spirit’s new middle seats will have an extra inch of space relative to the aisle and window seats. The carrier said each will also have a full-sized tray table. The carrier also plans to announce a new aircraft order as soon as this year.

To contact the reporter on this story: Justin Bachman in Dallas at jbachman2@bloomberg.net

To contact the editors responsible for this story: Brendan Case at bcase4@bloomberg.net, Susan Warren

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