Spirit Airlines wistfully flew west

Spirit Airlines ceased operations on May 2, with roughly 17,000 employees losing their jobs. It concluded an intriguing journey that started in 1992 when its predecessor charter company was rebranded and entered the scheduled commercial airline business.

The westward flight of the airline didn’t materially impact the Bay Area travelers, barring some inconveniences. Spirit served San Francisco only briefly, while focusing its operations with handful of flights out of Oakland and San Jose airports.

On Oct. 15, 1989, CBS 60 Minutes interviewed Herb Kelleher, the legendary co-founder and CEO of Southwest Airlines. At that time, Southwest just crossed the threshold to be considered a major airline, along with uninterrupted profitability since its first flight in June 1971. In that formative interview, Kelleher masterfully depicted the fundamentals that made Southwest distinct from other carriers.

By the end of 1980s, runways were splashed with the blood of airlines, both entrenched and startups, that didn’t make it after the airline deregulation of 1978. Out of that chaos, two airline business models emerged. American Airlines, under the leadership of Bob Crandall, created a full-service, highly sophisticated and automated, and decidedly disciplined model that became hugely successful. And Kelleher’s Southwest championed a paradigm that became known as low-cost, low-fare, no-frill. Noteworthy that between 1972 and 2002, of all the companies in S&P 500, Southwest had the highest return to investors.

That 1989 interview of Kelleher triggered massive interest by the airline investors to consider Southwest model that worked so successfully. And that led to Spirit launching its scheduled passenger operations based on that low-cost, low-fare model.

But Spirit later added a twist, and introduced ultra-low fare scheme. That was based on “à la carte” pricing, which included a very low fare and every other service — checked bags, carry-ons, onboard foods and beverages — charged separately. In essence, that became known as bare fare plus fees for optional ancillary services.  Spirit’s unbundling of ultra-low fare and on-demand services started aggressively in 2007, with the final rebranding as “bare fare” in 2014.  

In that respect, Spirit followed the Irish carrier Ryanair that earlier introduced in Europe ultra-low fares while charging for ancillary services. That model has made the carrier extraordinarily successful, with its operations network growing by leaps and bounds. By the mid-2000s, Ryanair was one of the most profitable airlines worldwide.  

Spirit experienced the same success. After the “bare fare” rebranding, the airline’s fortune was amassing.  That continued until 2019 when the airline posted $335 million in profits.  

In the Ernst Hemingway novel “The Sun Also Rises,” a question was asked from a broke person, “How did you go bankrupt?” He replied, “Two ways. Gradually, then suddenly.” When the pandemic hit and turned the economy on its head, Spirit started losing its fiscal altitude slowly, beginning with losses of $429 million in 2020 that grew slightly every year thereafter. Then in 2024, the airline precipitously lost $1.23 billion, and then $2.76 billion last year, which led to its demise.

Spirit could not attune to the new realities post 2020. Others who adjusted quickly survived categorically. Lao Tzu said, “Do nothing, and everything will be done,” as an advice for harmonizing efforts with the situation at hand. But Spirit took that advice plainly as doing nothing, and remaining hopeful of a better future. Its brand continued to get tarnished, and it became the butt of jokes.

There are two fundamental indicators in the airline business: yield and unit cost. Yield is the revenue generated by carrying one passenger one mile, and unit cost is the cost of flying one seat one mile.  The ratio of yield to unit cost is a key performance indicator. In 2025, that ratio was 1.28 and 1.06 for Ryanair and Spirit, respectively. That illustrated Spirit had deep troubles in its financial and operational structure. For the bare-fare model to work, the airline needs to operate shorter flights and get higher aircraft usage. For Ryanair, the average flight length was 783 miles and the aircraft daily utilization was 9.6 hours. The same figures for Spirit were 978 miles and 7.7 hours.

Bidding adieu to Spirit is hard. Maybe with some focused determination, the airline could have been saved, even while facing a strong head wind.

Jahan Alamzad is a management consultant and lives in San Carlos.