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Spirit continues rapid expansion from American’s stronghold of Dallas/Forth Worth


Spirit Airlines is planning further growth at Dallas/Fort Worth after rapidly building up a presence at the airport during the last couple of years. By Apr-2013 Spirit will serve nearly 20 destinations from DFW after only re-launching flights from the airport in 2011.

In late 2012 Spirit is adding two new stations to its network once it launches new service from Dallas to Baltimore and Houston, where it will square off with familiar legacy competitors and Southwest Airlines. Spirt also has unveiled plans to launch service from Dallas to Los Angeles and Oakland in 2Q2013 but will be dropping from Sep-2012 service on the Dallas-Boston route, one of several Dallas routes it launched earlier this year.

Spirit is also dropping in Sep-2012 flights from Chicago to Los Angeles, indicating its push over the last year at fortress legacy carrier hubs such as Dallas and Chicago has not enjoyed total success. At Dallas, Spirit’s push from American’s fortress is a highly calculated move into a legacy stronghold where the ultra low-cost carrier concludes it can peacefully co-exist with a legacy rival that happens to offer higher fares while struggling to lower its costs through a Chapter 11 restructuring. American also has a hub at Chicago O'Hare, where United has an even bigger hub.

During the last two years Spirit has made a pronounced expansion into the US domestic space after focussing expansion for several years on Latin America and the Caribbean from its Fort Lauderdale headquarters. The expansion has included a push into US carrier legacy fortress hubs including Atlanta, Dallas-Fort Worth, Chicago, Minneapolis and Denver. Spirit, which has followed an ulta low-cost model since 2007, has also added the Southwest-dominated Las Vegas market as a base, and opted to enter the contested Los Angeles market.

Spirit Airlines route map: 02-Jul-2012

Spirit’s most significant expansion has occurred at Dallas-Fort Worth, where in just two years the carrier has expanded into 15 markets, 12 of which were launched in 1H2012 alone. Dallas-Fort Worth is now Spirit’s fourth largest base in terms of seats offered per week, and the carrier is the airport’s second largest airline, albeit a distant second behind American Airlines.

Spirit Airlines top hubs/bases/stations based on capacity (seats): 02-Jul-2012 to 08-Jul-2012

Dallas/Fort Worth International Airport capacity by carrier (seats per week): 02-Jul-2012 to 08-Jul-2012

The growth in Dallas has been intentional as Spirit concluded American’s dominance in the market created an opportunity for its ultra low fare model as DFW suffered from high fares. The incumbent carrier’s years-long struggle with high costs and its Nov-2011 entry into Chapter 11 bankruptcy protection helped to fuel Spirit’s rapid expansion from the airport.

See related article: Spirit Airlines broadens its focus to both legacy entrenchments and classic niche markets

Part of Spirit’s calculus to enter into legacy-dominated markets is its confidence of driving 40% traffic (which equals two-to-three daily flights) stimulation, on 25% lower fares without robbing customers away from legacy airlines. Spirit management has stated that legacy carriers largely leave the carrier alone when it makes an entry into one of their markets since Spirit targets a low-yielding, price-conscious traveller base that does not need the frills featured in the hybrid (low-cost airlines that provide some level of frills for passengers) and legacy airline passenger experience.

The next wave of Spirit’s growth from Dallas begins in Sep-2012 when Spirit plans to introduce flights to Baltimore and Houston. Additionally, Spirit has opted to shift its Washington National-Fort Lauderdale flights to Baltimore-Washington International Airport. Spirit will become the 13th carrier serving BWI.

Spirit has served Washington National for nine years, but is limited in its expansion at the slot controlled airport. The carrier has more growth potential at BWI, which is about 60km from Washington National. Spirit now operates about 20 weekly flights from National to Fort Lauderdale and also flies one weekly flight from National to Myrtle Beach in South Carolina. Spirit is moving away from competing with US Airways and hybrid carrier JetBlue in the Washington National-Fort Lauderdale market to joining Southwest and AirTran in the Baltimore-Fort Lauderdale market.

Southwest and AirTran, which are currently in the process of fully merging after Southwest acquired its smaller rival in 2011, are the two largest carriers at BWI in terms of seating capacity. Combined Southwest and AirTran offer about 6,600 weekly one-way seats from Baltimore to Fort Lauderdale, while Spirit’s one-way seats from National to its Fort Lauderdale headquarters are now approximately 3,500. Spirit will initially offer two daily round-trip flights from Baltimore to Fort Lauderdale.

New push from DFW pits Spirit against familiar legacy and new low-cost carriers

Spirit is competing with American on its new service from DFW to Baltimore. American offers roughly 4,300 one-way weekly seats in the market while Spirit will operate just a single daily flight on the pairing with its A320 family aircraft that have a single-class seating range of 145 to 218 seats (depending on the variant as Spirit operates A319s, A320s and A321s).

The carrier’s selection of the Dallas-Houston route is particularly interesting as the market is one of the busiest US intra-state routes outside the California pairing of Los Angeles to San Francisco, which currently averages about 44,000 weekly one-way seats. American and Untied combined offer roughly 10,000 one-way seats from DFW to Houston Intercontinental, which is currently United’s largest hub. The Dallas Love Field-Houston Hobby flight is one of Southwest’s oldest and largest routes, with the LCC currently offering roughly 21,600 weekly one-way while United also serves Houston Intercontinental from Love Field with about 2,000 weekly one-way seats.

All the service available from both Dallas area airports to the Houston region generates roughly 33,600 weekly one-way seats. It seems like the market is well-served by two legacy carriers that have hubs on each end and the associated loyalty customer base that accompanies such service.

Dallas/Fort Worth to Houston Intercontinental capacity by carrier (seats per week, one way): 02-Jul-2012 to 08-Jul-2012

Carrier Seats Share
American 6300 63%
United 3726 37%

Dallas Love Field to Houston Intercontinental capacity by carrier (seats per week, one way): 02-Jul-2012 to 08-Jul-2012

Carrier Seats Share
United 1991 100%

Dallas Love Field to Houston Hobby capacity by carrier (seats per week, one way): 02-Jul-2012 to 08-Jul-2012

Carrier Seats Share
Southwest 21,556 100%

Southwest also has its own strong following in the Dallas-Houston market, and unlike United or American will likely attempt to match Spirit’s fares for a period of time to ensure it retains a loyal following on its Dallas-Houston fights. The intra-Texas market has a much different traveller footprint than the cost-conscious customers Spirit targets from its Fort Lauderdale hub travelling to the Caribbean and Latin America, which could diminish the odds of Spirit successfully stimulating enough traffic to make the route viable over the long term. Spirit plans to add a second daily DFW-Houston flight in Nov-2012, but it is not a given the additional capacity will help the carrier meet its profitability goals on the pairing.

Spirit should have better success with its plans to begin flights from DFW to Cancun, Mexico in Nov-2012 pending US Government approval. Spirit has cited its desire to replicate the push it has made from Latin America and the Caribbean from Fort Lauderdale from destinations in the western US, and the carrier recently launched its first international flight from DFW to Toluca, Mexico.

Cancun is a strong leisure travel market with a passenger base that responds favourably to Spirit’s ultra low baseline fares and add-on frills for a price. Spirit already has an established presence in Cancun through daily flights from Fort Lauderdale and a weekly flight from Detroit. Spirit has told US regulators it would increase its single weekly flights from Dallas to Cancun to three weekly offering in Apr-2013, and spool up to daily service in Jun-2013. American currently offers four daily flights from Dallas to Cancun.

During Apr-2013 Spirit also plans to launch a single daily flight from Dallas to both Los Angeles and Oakland in California. Dallas-Los Angles is another crowded market currently served by American, United and Virgin America. American is the dominant carrier in the market, accounting for about 83% of the seat capacity, Virgin America has an 11% share while United hold just a 6% share of the seats.

Virgin America opted to compete with American in one of its largest markets – Dallas-Los Angeles – when it launched flights from its Los Angeles and San Francisco bases to American’s largest hub in Dec-2010. Virgin America and American target the same passenger base, yet Virgin America offers lower fares with frills that include some free in-flight entertainment, power ports at every seat and an upsell to premium offering that includes a wider seat, more legroom and two free checked bags for prices that are lower than American’s business class fares. So far Virgin America appears to be holding its own on its flights from California to Texas with load factors on flights to DFW averaging about 72% in 2011.

Dallas/Fort Worth to Los Angeles capacity by carrier (seats per week, one way): 02-Jul-2012 to 08-Jul-2012

Carrier Seats Share
American 21,556 83%
Virgin America 2919 11%
United 1518 6%

See related article: Spirit and Virgin America show drastically different outcomes from capacity growth

Similar to Spirit’s decision to enter Houston, it is not clear if the carrier’s daily flight to Los Angeles can generate enough traffic to steer the route to profitability even though a single daily flight is a low-risk level of capacity. Dallas-Los Angeles has a higher business traveller mix, which was one of the drivers for Virgin America’s market entry. While Spirit’s stated goal is not a market share grab, it is not certain that a sustainable level of passengers will be drawn to the carrier’s no-frills service as again both American and United have built their own loyalty bases, and Virgin America has a solid following among tech-savvy travellers.

No carrier currently offers flights from DFW to Oakland, although American, United and Virgin America offers flights from Dallas to nearby San Francisco (located 19km from Oakland) for a combined one-way weekly seat total of about 16,100. American accounts for about a 72% share of capacity in thsi market while Virgin America and United hold shares of 18% and 10%, respectively.

Dallas will become Spirit’s second destination from Oakland, where the carrier currently offers flights to its Las Vegas base. Spirit faces some of the same hurdles in Oakland as in Dallas-Los Angeles, as San Francisco is home to Virgin America and a major hub and Pacific gateway for United. With so many service options compared to Spirit’s single daily flight and no-frills service proposition, it remains questionable if price alone can stimulate traffic in these highly contested markets even if the legacy carriers essentially leave Spirit alone and do not retaliate with their own pricing actions.

Dallas/Fort Worth to San Francisco capacity by carrier (seats per week, one way): 02-Jul-2012 to 08-Jul-2012

Carrier Seats Share
American 11,528 72%
Virgin America 2919 18%
United 1636 10%

Spirit’s push into Dallas should become even more interesting in 2014 when restrictions on service at Love Field end with the lifting of the Wright Amendment that has limited flights from the facility to a certain number of neigbouring states. While the flight prohibitions have been gradually loosened over the years, the full repeal of the Wright Amendment that governs the restrictions creates some opportunity for Southwest out of its Dallas headquarters, but the number of gates allowed for use at the airport is limited to 20.

Southwest could likely offer direct flights from Dallas to its largest bases that it cannot currently operate including BWI, Chicago and Denver, which are all currently served by Spirit from DFW (see Background information). New Southwest pairings could change Spirit’s calculus in those markets as Southwest ushers in another tier of pricing in those markets alongside its popular “No hidden fees” philosophy that includes free checked luggage. Spirit charges for both checked and carry-on baggage.

Southwest Airlines top hubs/bases/stations based on capacity (seats): 02-Jul-2012 to 08-Jul-2012

Spirit makes cuts in crowded markets as it focuses on growth at DFW

While two markets do not constitute a trend, it may be significant that Spirit is exiting a couple of routes from Dallas and Chicago later in 2012 where it competes with both legacy and low-cost carriers. This could suggest that market stimulation is more difficult in markets with competition from hybrid LCCs that unlike Spirit offer some level of frills as part of the passenger experience, but without the extreme price premium of the network airlines.

Spirit now competes with fellow low-cost carriers in just two markets from Dallas – Boston and Denver (see Background information). JetBlue offers roughly 2300 one-way weekly seats from Dallas to Boston representing about a 19% share of capacity on this route while Frontier operates about 4300 seats to its Denver hub from Dallas, which accounts for about a 24% share of capacity.

Dallas/Fort Worth to Boston capacity by carrier (seats per week, one way): 02-Jul-2012 to 08-Jul-2012

Carrier Seats Share
American 9045 73%
JetBlue 2300 19%
Spirit 1015 8%

Dallas/Fort Worth to Denver capacity by carrier (seats per week, one way): 02-Jul-2012 to 08-Jul-2012

Carrier Seats Share
American 8534 48%
Frontier 4260 24%
United 2812 16%
Spirit 2812 13%

Flights operated by Spirit from Dallas to Boston were only introduced in Mar-2012. The carrier now plans to suspend the route in Nov-2012, just eight months after its its inauguration, according to GDS filings. The decision to cut the route comes just a few weeks after JetBlue’s May-2012 debut in the Dallas-Boston market.

While JetBlue represents just a portion of the seats from Dallas to Boston, the carrier is the largest airline in Boston, accounting for 25% of the airport’s seat share. JetBlue’s goal in launching flights to Dallas from its Boston focus city was largely business traveller expansion, but the amenities offered by JetBlue (seatback television, free snacks and beverages) for a fare level that falls in between Spirit and American could have dampened Spirit’s market stimulation calculations. JetBlue’s entrenched brand awareness in Boston, coupled with more marketing spend in the launch of Dallas-Boston also seem to have pressured the passenger levels Spirit estimated it could capture on the route.

Boston Logan International Airport capacity by carrier (% of seats): 02-Jul-2012 to 08-Jul-2012

For the moment Spirit seems to be co-existing in the Dallas-Denver market, where both Frontier and United offer flights from their Denver hub, and American also offers service. Spirit introduced flights from DFW to Denver in May-2012, so the route remains in its proving-out phase. If the Dallas-Boston market is any indication, Spirit could quickly decide to make an exit if its profitability expectations are not met.

Spirit cuts one of two markets from Chicago with LCC competition

Chicago is another market where Spirit has made a targeted push during the last couple years, and currently serves 12 cities from O’Hare International Airport. During a short period of time, Chicago has risen to become Spirit’s third largest base with respect to seats offered.

Spirit is opting to cut flights from Chicago to Los Angeles in Sep-2012, a market served by fellow low-cost carrier Virgin America as well as American and United. The route is being cut as Spirit prepares to compete with Virgin America on flights from DFW to Los Angeles beginning in Apr-2013.

Boston and Los Angeles are the only markets Spirit serves from O’Hare that have both legacy and low-cost competition. Virgin America offers about 2900 weekly seats in the Chicago-Los Angeles market, which accounts for about a 11% share of capacity. Spirit’s seat share is just 4% while legacy carriers American and United account for 45% and 44% shares, respectively.

Chicago O'Hare to Los Angeles capacity by carrier (seats per week): 02-Jul-2012 to 08-Jul-2012

Carrier Seats Share
American 11,758 45%
United 10,541 40%
Virgin America 2919 11%
Spirit 1015 4%

Virgin America’s seat share is modest compared with its legacy competitors, but like JetBlue and Boston, Los Angeles plays a strategic role in Virgin America’s network, serving as the carrier’s second largest base. From most of its large US markets, Virgin America typically serves both Los Angeles and its San Francisco base with direct flights, as is the case with Chicago.

Virgin America top hubs/bases/stations based on capacity (seats): 02-Jul-2012 to 08-Jul-2012

The Chicago-Los Angeles market is primarily a business travel pairing whose travellers enjoy either long-standing, built-up loyalty with American and United, or who prefer Virgin America’s targeted catering to tech-savvy customers that enjoy power outlets and in-flight connectivity. There seems to be no visible place for Spirit’s no-frills product to fit into that particular market as Virgin America, like JetBlue, is able to offer a more refined product that is priced in between Spirit’s bare-bones offering and the higher fares charged by the legacy carriers.

Spirit inaugurated its Los Angeles-Chicago flights in Apr-2011 (before Virgin America’s May-2011 debut from O’Hare), which makes it a more mature market for the carrier than Dallas-Boston. Previously, management at Spirit has indicated the carrier’s markets reach a level of maturity that produces profitability within six months to year. Using that logic, the two markets being cut did not live up to the carrier’s expectations. But on both routes the carrier only offers a single daily flight, which is fewer than the estimated two to three daily flights it needs for the proper level of stimulation.

Part of Spirit’s strategy of offering low-frequency service in the routes the carrier serves is creating flexibility to redeploy its aircraft assets to other markets it deems more viable, but it seems Spirit is still attempting to determine viability on the raft of routes it has inaugurated during the last couple of years. The carrier obviously has some confidence that its market stimulation tactics should prove fruitful in already-crowded markets, as evidenced from its new service from DFW, but it is likely more route adjustments will follow as its product might fail to gain traction in markets that are more populated by business travellers.

Background information

Spirit's competition in markets from Dallas/Fort Worth (seats per week, one way): 02-Jul-2012 to 08-Jul-2012

Market Carrier Seats Share
Atlanta Delta 10,714 55%
  American 7700 39%
  Spirit 1213 6%
Chicago O'Hare American 17,080 75%
  United 3544 16%
  Spirit 2268 10%
Detroit American 5040 61%
  Delta 2155 26%
  Spirit 1015 12%
Fort Lauderdale American 6400 74%
  Spirit 2234 26%
Las Vegas American 9080 80%
  Spirit 2268 20%
New York LaGuardia American 14,220 93%
  Spirit 1015 7%
Orlando American 9240 88%
  Spirit 1253 12%
Portland American 4200 81%
  Spirit 1015 20%
San Diego American 7820 86%
  Spirit 1015 12%
Tampa American 6020 91%
  Spirit 580


Spirit's competition in markets from Chicago O'Hare (seats per week, one way): 02-Jul-2012 to 08-Jul-2012

Market Carrier Seats Share
New York LaGuardia American 12,880 54%
  United 8627 36%
  Spirit 2506 10%
 Boston American 9120 44%
  United 8055 39%
  JetBlue 2450 12%
  Spirit 870 4%
Denver United 10,198 68%
  American 3507 23%
  Spirit 1253 8%
Detroit United 3284  36%
  Delta 2633 29%
  American 2092 23%
  Spirit 1015 11%
Fort Lauderdale Spirit 3045 42%
  United 2226 31%
  American 2000 28%
Las Vegas American 4880 40%
  United 4045 33%
  Spirit 3283 27%
Minneapolis United 6797 36%
  American 4991 27%
  Delta 4018 21%
Myrtle Beach Spirit 1015 94%
  United 70 6%
Orlando United 4183 50%
  American 3220 38%
  Spirit 1105 12%
Dallas American 17,100 75%
  United 3319 15%
  Spirit 2268 10%

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