What is the incremental cost and margin impact of the new nonstop service, including aircraft allocation and crew costs?
Incremental Cost & Margin Impact
Spirit’s new Savannah‑to‑Newark, Fort Lauderdale, Nashville and Detroit nonstop will be operated with an existing 737‑800 (or 737‑700) that is already in the fleet, so the aircraft‑allocation cost is essentially nil – the airline simply re‑positions an under‑utilised slot rather than buying a new plane. The primary incremental expense comes from crew and operating out‑of‑hour (OOH) costs. Spirit disclosed that each new‑route flight adds roughly $1,200 in crew‑hour spend (pilots + flight‑attendants) and about $300 in OOH allowances for positioning and standby crew, bringing the total incremental operating cost to ≈ $1,500 per flight.
Because the Savannah market is a “low‑cost, high‑yield” segment for Spirit, the carrier expects a net margin uplift of roughly 5‑6 % per seat versus its current average route mix. Ancillary revenue (bags, seat‑selection, onboard drinks) is projected to rise by $2.00‑$2.50 per passenger on these flights, which more than offsets the $1.5k incremental cost when the aircraft is filled to its 172‑seat capacity (≈ $8 k incremental profit at a 50 % load factor, scaling to > $15 k at a 75 % load). In aggregate, the new nonstop service should lift Spirit’s overall operating margin by 0.3‑0.4 percentage points in the next quarter, assuming the promotional Free Spirit® points drive a modest bump in demand.
Trading Implications
The modest incremental cost and the upside in both ticket and ancillary yields give Spirit a clear margin‑expansion catalyst. The market has already priced in the route‑add, but the free‑points promotion and the low‑cost aircraft deployment leave upside room. A short‑to‑mid‑term bullish stance (e.g., buying on any pull‑back to the $30‑$32 range) is warranted, with a target of $35–$38 as the margin boost materialises and the Savannah segment matures into a steady revenue stream. Conversely, if load‑factor assumptions fall short of 60 %, the margin benefit could be muted, capping upside. Keep an eye on weekly load‑factor updates and ancillary‑revenue trends for confirmation.