Last updated: 10:21 AM ET, Tue March 29 2016

Why Is Spirit Buying Smaller Airplanes?

Airlines & Airports | Josh Lew | March 29, 2016

Why Is Spirit Buying Smaller Airplanes?

Spirit Airlines is changing the size of its fleet, and in doing so, may be showing that it intends to focus more on smaller markets in the future.

Spirit has leased a large number of one of the smallest Airbus models, the A319. Many of these leases are now up for renewal. Rather than re-signing the same rental deal, however, the airline is purchasing more of the A319s outright. At the same time, it is switching some of its orders for larger A321s to smaller A320s.

Why go small?

This is a change from what has been happening over the past few years. Airlines, including Spirit, had been trying to add as much capacity as possible by opting for larger aircraft. This strategy has actually left more seats empty and reduced profit-per-seat statistics. These lower figures were one of the reasons that Spirit’s stock struggled last year even though it was enjoying high overall profits.

Committing to smaller aircraft will help improve cost per seat numbers, but it will also offer a bit more flexibility.

Less competition can be a good thing

With a larger fleet of smaller aircraft, Spirit does not have to fly high-demand, highly-competitive routes in order to fill seats. It can focus on smaller markets and not have to worry about competing directly with the Big Three.

There has been a shift in power in many of these smaller markets recently. Larger carriers have dropped all but their most competitive routes at many smaller and mid-sized airports. This has left the door open for carriers like Southwest, Frontier, Allegiant and Spirit.

READ MORE: Is a New Trend Helping Smaller Airports Succeed?

The Big Three have left these smaller markets because they were not able to fill enough seats. This is where Spirit's new A319s come in. In order to make these routes work, the low-cost carriers have to maximize the number of seat miles while reducing operating costs as much as possible. Spirit’s shift to smaller aircraft is the most straightforward way to do this.

What does this mean for fliers?

Ideally, the shift will bring more direct flights to smaller markets. People will be able to fly directly from, say, Milwaukee to San Diego rather than having to lay over in Denver or somewhere else. On the other hand, those who do not care for the extra fees that low cost carriers charge will not be happy with this shift.

Also, there will still be the problem of lack of demand. Low-cost carriers may offer cheaper fares compared to the departing legacy airlines and there may be some great deals when new routes are first launched, but without competition on these routes, fares will still most likely be higher on small-city routes than they are on routes between major hubs.

There is probably no way around this, since there is not enough demand on many routes from smaller markets to support more than one airline. Still, though, if Spirit’s move does signal a shift to smaller markets, it means that these markets will at least have more route options in the future. 


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