Spirit Airlines 2011 Annual Report Download - page 12

Our experience has historically been that when we enter a new market, average fares in that market generally decrease and total passenger
traffic generally increases. We believe there are hundreds of these high fare markets throughout the Americas which we can penetrate and
benefit from, by stimulating local price-sensitive travelers.
Leverage Our Brand to Grow Revenue . We will seek to continue generating customer loyalty as the low-fare brand of choice in the
markets we serve in order to drive future ticket sales, support further network expansion and increase load factors. In addition, we intend to
leverage our customer base in order to increase non-ticket revenues by broadening our brand, product and service offerings. These plans include
a focus on increasing sales of itinerary attachments on a commission basis and generating additional fees from proprietary, brand-
based services,
such as our FREE SPIRIT miles and our $9 Fare Club ultra low-fare subscription service.
Maintain Disciplined Fleet and Network Growth . We employ a disciplined route and fleet expansion strategy that helps us maintain
profitability across our network. Our goal is to react quickly to changes in the economic environment and market conditions so each route and
each aircraft we operate delivers incremental operating profitability. As of December 31, 2011, firm aircraft orders with Airbus consisted of
106 A320 aircraft (61 classic A320s and 45 A320 NEOs). Aircraft are scheduled for delivery from 2012 through 2021, and spare engines are
scheduled for delivery from 2012 through 2018. We are scheduled to take delivery of 7 aircraft in each of 2012, 2013 and 2014, ten aircraft in
2015 and 75 aircraft from 2016 through 2021. We have 30 aircraft with operating leases that expire between 2017 and 2020 for which we have
the option to either renew the lease or return them to the lessor at the end of the lease period. We expect to use our additional aircraft to add
capacity on existing routes in both our targeted growth markets and our higher demand domestic routes, as well as to expand our network
footprint. Consistent with our ULCC model, the new A320s introduced by us are configured with 178 passenger seats compared to 150
passenger seats per plane utilized by some of our competitors, including JetBlue Airways. The introduction of higher-capacity A320 aircraft
supports reductions in unit costs relative to smaller A319 aircraft and allows us to deploy the right-sized aircraft according to route length,
passenger volume and seasonality.
Our Products
Our product is our low priced base fares. We provide passenger airline service primarily to price-sensitive travelers and optional travel-
related products or services for additional fees. Our low fares are designed to stimulate demand from price-sensitive travelers who might not
otherwise have flown to our destinations due to the expense or inconvenience involved in traveling there. Our fares do not require a minimum
stay (e.g., Saturday night stay). Our fares consist of a base fare, plus taxes and certain governmental fees, which we break out for our customers
so they can see the different components of their total price.
Our non-ticket revenues are generated from air travel-related fees paid by the ticketed passenger through baggage, bookings through our
distribution channels, advance seat selection fees, ticket change fees, the sale of food, beverages and other items on board, commissions from the
sales of hotel rooms, trip insurance and rental cars and other items related specifically to an itinerary. We view our onboard service as a retail
store, with managed inventory levels, a charge for all products and a commission structure designed to provide an incentive to sell products. We
also sell vacation packages through Spirit Vacations, a one-stop, value-priced vacation website designed to meet customers’ demand for self-
directed packaged travel planning. Spirit Vacations packages offer competitive fares for air travel on Spirit, a selection of Spirit-recommended
hotels and resorts, car rentals and attractions.
Our other revenues consist of services not directly related to providing transportation such as our FREE SPIRIT affinity credit card
program, $9 Fare Club ultra low-fare subscription service, and the sale of advertising to third parties on our website and on board our aircraft.
Effective August 1, 2010, we instituted a carry-on baggage policy that we believe increases utilization through shorter turn times and
allows customers to save more. Under this policy, subject to certain Federal Aviation Administration, or FAA, limitations, a bag that can fit
under an aircraft seat (although not required to be placed under the seat) may be carried on board free of charge. A second or larger bag may be
carried on board for a fee of $30 if reserved at www.spirit.com or $35 if purchased during online check-in or by phone. Members of Spirit’s $9
Fare Club receive a $10 discount on carry-on bag fees if purchased during online check-in or by phone prior to arrival at the airport. The carry-
on bag fee for all customers if purchased at an airport ticket counter or kiosk is $40, or $45 if purchased at the airport gate. Passengers paying for
an additional bag receive priority boarding to allow more time to stow extra luggage. Corresponding with this carry-on baggage policy, many
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• attempting to maintain profitability across our network by selecting viable new routes and quickly reducing or discontinuing routes that
do not deliver acceptable margins; and
• selectively expanding our presence in markets where there are high fares or that are underserved by low-fare carriers that present
opportunity for demand stimulation when fares are reduced.