How Spirit Airlines Makes Newark Work As A Low-Cost Carrier

Newark Liberty International Airport (EWR) has been in the spotlight for multiple reasons this year. Earlier this year, the US government lost in a lawsuit over its removal of peak movements at the airport, meaning that it now has to allocate more movements to an airline in a bid to spur competition and comply with the ruling. Spirit Airlines was the one that brought the lawsuit and is looking to capitalize on its position in Newark. Simple Flying spoke with John Kirby, Spirit’s Vice President of Network Planning, about the airline’s position and how it has found success there.

Spirit Airlines has been an outlier in making low-cost operations work in Newark. Photo: Vincenzo Pace | Simple Flying

Spirit Airlines sues over Newark

Spirit Airlines won a lawsuit against the US government over Newark earlier this year. The Federal Aviation Administration (FAA) decided to retire Southwest’s peak hour authorizations when the airline announced it was pulling out in November 2019. Southwest had formerly won those slots in the wake of the United and Continental merger. At the time, the rationale behind giving the movement authorizations to Southwest was to offer low-fare competition at the airport dominated by the United Airlines hub.

Spirit Airlines objected to the decision. However, the US government was not willing to listen. As a result, the airline decided to file a lawsuit. In May, the United States Court of Appeals in the Washington D.C. Circuit sided with Spirit, and now the FAA has to bring back those movements. Delegated to the Department of Transportation (DOT), there is now an open docket over who gets those slots. Spirit Airlines is pushing hard for them.

Newark is not slot-controlled in the way other famous New York airports, John F. Kennedy International Airport (JFK) and LaGuardia Airport (LGA), are. The DOT still maintains some oversight, but it has held off on bringing back slot controls to Newark. The airlines work with the airport operator and relevant agencies to determine an optimal schedule that would maximize the utilization of the airport’s facilities, reduce delays, and minimize the noise impact on surrounding areas.

Newark is a high-cost airport

Comparatively speaking, Newark, located in New Jersey, is an expensive airport. In November, Frontier Airlines, another ultra-low-cost carrier, announced it would cease service at Newark in early 2022 due to the high-cost situation at EWR. While some larger airlines swallow the cost in the course of their operations, it becomes harder for low-cost airlines to operate, given that their model is focused on offering low-fare options that become harder to do when the cost per passenger enplanement (CPE) are so high.

Some larger airlines have even taken a victory lap at Newark against low-cost operations. This summer, United Airlines CEO Scott Kirby did as much by stating that the business model for a low-cost carrier to fly into an airport like Newark does not work, citing Southwest’s withdrawal from the airport.

However, Spirit’s John Kirby (no relation to Scott Kirby) explained how the airline makes it work:

“So our model is high utilization and an efficient use of facilities. So when we go into market like Newark, we’re gonna fly eight to ten flights a gate…CPEs are averages. If a CPE is ten, somebody’s six, and somebody’s 14. Everybody looks the averages. Were always one of the lowest CPEs. So if the CP at Newark is x, we’re probably 30% 40% below the average and and a lot of guys are above that average. Even though it’s higher than let’s say our system, we have a cost advantage even at a place like Newark. And at the end of the day, though, then you still have to believe you can get the revenue to offset that cost.”

There is an impact of operating economics here as well. No airline will sell every seat out of Newark above cost, but the goal is to average out yields on a flight to be able to run a profitable operation.

Spirit sees success in Newark

Spirit Airlines has made Newark work when airlines like Southwest or Frontier have not. Mr. Kirby described the success Spirit has seen at Newark:

“In the case of Newark, we’ve been very successful. Not only have we grown during the pandemic, we’re about 50%, larger at Newark today, than we were pre pandemic…and as you know, we’ve actually, reluctantly, went to the extreme of suing the Department of Transportation for more peak slots. Now, you don’t do that unless you’re doing well and you truly want more.”

Using data from Cirium, Spirit’s growth is quite clear. In July 2019, the airline scheduled 388 flights with 76,878 seats. However, come July 2022, the airline has scheduled 584 flights with 121,744 seats on sale. This is a difference of 50.5% in terms of flights per month and 58.4% in terms of seats. Using available seat miles (ASMs), which are a generally-accepted industry measure of capacity, Spirit’s July 2022 ASMs are 58.3% higher than its July 2019 numbers.

While Spirit has cut two routes (Charlotte and Santo Domingo), it has added San Juan (SJU), Miami (MIA), Austin (AUS), and Nashville (BNA). It has also grown Myrtle Beach (MYR), Orlando (MCO), Fort Lauderdale (FLL), and Atlanta (ATL). While schedules are subject to change, the growth is apparent, and Spirit is hungry for more.

The big three US airports are JFK, LGA, and EWR. JFK is an airport that ULCCs actively avoid and is primarily an international gateway for the New York area with strict slot controls. LaGuardia is more friendly and has a sizable low-cost operation, including from Spirit and Southwest, though there is not much room left for Spirit to grow. It is making an effort, including by operating some Saturday-only flying, but it is overall relatively constrained there, with little signs of other airlines exiting the airport.

In short, Spirit Airlines has made Newark work because it has utilized the airport’s facilities to the greatest extent possible, thereby reducing its overall average cost and making its low-cost operations sustainable. Now, it is hoping to get the slots from the DOT, which would enable it to grow significantly at some of the most hotly-desired time slots.

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