Spirit Airlines, the ultra-low-cost carrier that prizes its cut-rate fares as well as upcharging for a whole host of add-ons, is getting a little dose of passenger pushback about now. On Tuesday, it issued an 8-K filing of second-quarter revenues lower than analysts’ expectations.
The company has now re-forecasted its revenue to $1.28 billion way down from its earlier forecast of $1.34 billion. The company attributes this fall to underperformance in the case of non-ticket revenue which includes various add-ons like in-flight snacks, fees for checked bags, and seat selection charges.
Spirit predicts $64 in non-ticket revenue per passenger segment, which it said is “many dollars less than expected.” Any miss in this estimate would signal increasing consumer stubbornness in paying for anything over the base fare.
The airline charges on some add-ons represents an extremely different pricing structure. For regular seat selection, it varies from $1 – $200. For the airline’s premium seats prices may soar up to $900 in extreme cases. In 2022, one Business Insider reporter got a Big Seat for $35 more than a $30 base fare; beverages and snacks ran $1 to $15, and a carry-on baggage fee was up to $50 for a New York to Orlando flight.
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Deutsche Bank analysts say the recent abolition of most of the company’s change and cancellation fees and increase for weight limits with checked luggage may have contributed to the revenue decline. It added that the airline experienced incremental pressure on ancillary or secondary expenses because of alterations in the competitive marketplace.”.
This comes as such carriers as Spirit and Frontier are facing closer public scrutiny. It was just this past June that United Airlines CEO Scott Kirby said these airlines were “going out of business,” claiming their business model was flawed and more widely disliked by customers.
As of Wednesday morning, the online bag fee calculator for Spirit’s website was still showing error messages, adding yet another layer of confusion over what passengers might be expected to pay. The airline did not respond right away when asked for comment on the situation by Business Insider.
The revenue warning signals a red light on the direction of consumer behavior, as passengers, dreading fares, are increasingly reluctant to pay for services above the base ticket price. This is a trend that very possibly affects the business model of Spirit and, more widely, the ultra-low-cost carrier segment.