Sunday, June 04, 2006

Spirit to Myrtle Beach & Other Spirit Thoughts

Spirit will is adding a Myrtle Beach/Boston run.

We're unsure about Baldanza being inserted as the CEO at Spirit. Is he capable of being innovative or is he going to be just another big airline exec making the same mistakes the rest of the US industry majors have made? Allegiant going public before Spirit is an embarrassment to everyone involved in the two rounds of equity infusions at Spirit (the second round being needed as they neared bankruptcy a year after the first). The bottom line is that Allegiant grew smarter than Spirit. Spirit's use of the equity lacked any creative thought. They applied big airline principles to their small airline by acquiring new aircraft and a build-up of a hub along the most beaten path at FLL. They banked on 199 seat A321s giving them the lowest ops CASM in the industry...when old-school metrics like that carry less weight than they ever have.

Our opinion on starting & growing airlines is more fully articulated in other posts (and in our models & other work), but put quite simply it is that there are still large opportunities for those who "zag" while the big boys in the industry "zig". Allegiant has done just that. Nobody wants MD-80s? "OK", says Allegiant to Spirit, we'll take your cast-off aircraft on the cheap. Nobody wants to fly to Sanford? "OK" says Allegiant, we'll be the only game in town at the 2nd airport in a top leisure destination & get big incentives along the way. Meanwhile, Spirit paid dearly for new Airbus and has more competitors per route than anyone else in the industry.

We've drastically simplified the Spirit / Allegiant comparison in this post. We could go on for quite a while...this is just a headline or two to consider when looking at the divergent fortunes of these relatively large EAs.

6 Comments:

At 4:11 PM, Anonymous Anonymous said...

If I'm not mistaken Baldanza was responsible for US's build up at FLL before he came to Spirit.

I met the guy 6 months ago and I can't say I was that impressed. He seemed extremely focused on cost side of the equation. I also have doubts about the cost/benefit of replacing the MD-80 fleet with the Airbus's.

Orlando's an interesting market, if I have a meeting downtown I would much rather fly into Sanford. If I have a meeting down near Disney I would want MCO.

 
At 7:50 AM, Anonymous planespotting@gmail.com said...

MD80's might be less fuel efficient than the Airbus, but look at the $$$ Spirit is burning right now with their new acquisition costs & pilot training costs. Allegiant can pick up a decent MD80 in the $4-5 mil range to run east coast routes from the FL area, and eventually add a 73 or A319/20 do to longer routes from LAS.

Is the market there for Myrtle Beach - Boston?

Allegiant's got brains. period.

 
At 3:51 PM, Anonymous Anonymous said...

From the 2005 Q4 O&D on the MYR-BOS /BOS-MYR

Unadjusted: 140

Coupon Level Adjusted O&D: 154
As a note this is not Database Products adjusted but we believe ours is better.

Average Fare around $115 each way after you remove taxes.

Now these numbers will climb because of a direct flight offering and presumably lower fares.

Hopefully, Spirit received a good lease/finance package for the planes but its still not the same situation as say Alaska replacing the MD-80's.

 
At 4:15 PM, Blogger Emerging Airlines said...

We love data. Thanks for going to the disk for us. Gotta love that funky sound it makes at the end of a DBP data pull...

What's the difference b/t the unadjusted and adjusted? Is that the $0 fare pax difference or something else?

Thanks
EA

 
At 5:45 PM, Anonymous Anonymous said...

Unadjusted was an almost straight pull from the raw government data, with the exception that the fare had taxes taken out.

Adjusted is
compared against T100Market.
Bad Fares and Average Fares noted.
Taxes are taken out.
Glaring carrier errors are fixed, e.g. foreign carriers flying domestic segments, markets incorrectly marked with the wrong carrier when the carrier is noted in the coupons, "--" data fixed if possible.
Missing carriers data added if possible, e.g. Fly I Q4

Now the passengers counts both include zero/bad fare passengers because the passenger did fly the market. The Average fare is the average between both of the sets corrected for taxes. I will post more detailed data later.

As a note
Seabury and Back only adjust data for taxes and fix some glaring errors.
Boyd is on a airport level, adjusts for taxes and fixes the carrier errors.
DBP is adjusted against T100M and sometimes fixes glaring errors, and generates missing carriers.

Our data is equivalent to DBP superset, with reporting fixes similar to Boyd.

The biggest problem we have run into is that the BTS tends to protect a certain company.

 
At 8:56 PM, Anonymous Anonymous said...

Ok this is our adjusted data aggragated by Carrier.
The average fare is tax adjusted and takes into account bad and zero fare passengers. Tax adjustments are the best guess, usually this is pretty darn accurate.

Pax Per Day/AverageFare/Carrier
97/$119/US
30/$113/DL
12/$109/CO
12/$118/UA
2/$98/NW
2/$131/Other(mostly US airways flights with a couple of wierd UA)

So average Pax Per Day: 154(note the above list is rounded so it adds to 155)
average fare: $117

 

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