Spirit Grounded: The Balancing Act in a Fuel-Dependent Industry

As a champion of privately owned transportation systems, from rideshare and commuter vanpools to Brightline trains and the airline industry, the loss of Spirit Airlines brings me a tinge of sadness. I never flew the yellow jets. The consensus I’ve heard is that Spirit had great staff on the airplane, but poor business strategy and non-existent operational redundancy kept away those who could afford better. Interest rates are a killer. Two years ago, I was looking at making a van purchase. It would have been the same price to purchase a ten-year-old vehicle at a higher interest rate, as a new vehicle would have cost at a lower interest rate. Reviewing the history of the 34-year-old airline, Spirit sought to standardize its fleet, in the model of other low-cost carriers. Unfortunately, engine recall issues grounded a significant portion of the airline’s fleet, and left the airline paying leases and mortgages for aircraft that couldn’t fly for revenue hours. Unhedged fuel prices finished off the airline. At the beginning of the recent conflict with Iran, I personally set aside a tankful of gasoline in case of fuel shortages or price spikes. That is a two-week supply for me. Many airlines, and other fuel-dependent transportation companies, hedge fuel prices to prevent pricing shocks. Other airlines, like Spirit, took the gamble that they can pass on price increases to the customer. Which leads to the K-shaped economic recovery: United Airlines noted that the average airline passenger today is demanding a premium experience, and is willing to pay the cost. Spirit provided mobility for young adults and the working class. Prior to the Pandemic, a more robust intercity bus network served as a Plan B, as did one-way car rentals. Now that one-way car rentals are difficult to obtain, and bus routes have been slashed to one trip per day on many key routes, the most reliable backup plan was to book a ticket on a “legacy” air carrier instead. Despite the meddling of an anti-trust judge in 2024, who blocked a merger between Spirit and Jet Blue, no Federal rescue plan was forthcoming. In the present case, it required cooperation with private bond issuers. The idea of a Trump Shuttle 2.0 was fleeting indeed. I turn to the New Jersey model of what could have been done to rescue Spirit Airlines. In that case, the state’s transportation department leased motorcoaches to established bus operators, at the rate of one dollar per year, on the condition that they run commuter service at regulated rates. Free of equipment amortization and interest costs, transportation companies suddenly have a lot more economic headroom to operate. However, since other low-cost carriers sought the same aid proffered to Spirit, it was too late to do anything quick enough to save the airline. (Did I eulogize Skybus back in ’08? I probably did).