A startup marketing scheme, by an old company creates goliath company in a dying age.
Spirit Airlines, rebranded itself as the ultra-low cost carrier and saw startup like growth at a time when the airline industry was falling apart.
Many people know Spirit Airlines by its limited leg room, nickle and dime pricing system and frequent delays/cancellations. Back in 2009 this was not a concern for me as I travelled frequently up and down the east coast for under $40 roundtrip. It was all love. This was a time when the $9 dollar fair club was LIFE for a broke college kid with a backpack for luggage and flights were actually as low as $9 each way. Around this same time a company who would later be acquired by Southwest Airlines concluded a program called Airtran U. So this became my preferred option of travel given they offered service to my destination. Before it’s death in 2009, Airtran offered college aged humans as low as $49 per segment to travel between airports where Airtran flights operated. Airtran U was very useful and became a common mode of travel. There was one caveat, you were not allowed to check luggage. Also, in most cases you had to visit Atlanta Hartsfield Airport as a stop in route to your destination (an amazingly large mess of an airport). This added a segment and in a few situations left me delayed over 12 hours. In some ways I was happy to find a new option.
Ok, back to Spirit.
Spirit Air created a marketing strategy and low-cost model to attract young and frugal travelers alike. It was brilliant! If you knew how to exploit the carry-on restrictions, like me, you were good — muy bueno. Cheap flights were used as a customer acquisition tool. Once in the funnel they trapped you with insane incremental pricing like a 2nd carry-on and checked luggage (which rolled much later). Even with fees in most cases you were at least a few dollars cheaper than the next option. I observed how useful a program the $9 fare club was, especially if you were traveling between Miami and New York City or Boston like I was. I became a self proclaimed ambassador for the brand and went about telling all my friends. but in the next year the prices began to rise. I convinced one friend to join in 2010, and he later resented me for it. Spirit had increased prices on specific destinations and joining the $9 fare club was more of a gimmick than a true value offering. I think my friend still blames me for selling him on that. On another note, I began to analyze Spirit’s approach as a really solid marketing strategy for a startup to employ. Spirit as a company was not new but from a brand awareness perspective they popped on the national radar big in 2009.
The Story behind Spirit’s Ultra Low-Cost Carrier Model
A move of its headquarters in December 1999 (Y2K) from Michigan to Miramar, Florida started the race for expansion and scale. It would not be until Oaktree Capital took a large interest in the company circa 2005 closing a total investment of $225 million allowing Spirit to expand from its US and Puerto Rico Destinations to including new Caribbean and Latin American routes. The real magic was due to a later investment in 2006 by Indigo Partners, LLC (a phoenix based private equity firm) who’s co-founder Bill Franke and had set up a number of ultra-low cost airlines around the world. A strategic player like Indigo with airline industry experience basically re-invented the company. In my opinion, after implementing a number of new strategies Spirit Airlines of 2007 was a different company entirely. Essentially a older predecessor re-structured with a start-up branding and marketing scheme. The airline industry was weak at this time walking dead into the recession and this was the perfect storm for a company like Spirit Airlines to compete with the remaining market competitors. Many other companies eventually merged or were acquired. The region airline pattern of the past was coming to an end. On the cusp of all this going on I discovered what I believed was a young and innovative company called Spirit that connected with my customer identity. What appeared as a new startup was actually much older in terms of maturity.
Sidenotes and Bullets:
This same private equity firm Indigo Partners would also back a company called Frontier Airlines.
The US domestic coined Ultra-Low Cost Carrier (ULCC) was most likely a knock off of Irish based airline Ryan Air who began offering fares in this same low-cost model starting as early as 1997.
Most airlines didn’t even have web presence until after 2001. Ryan Air had over 75% of its ticket purchases occuring online by late-2000.
