Spirit Airlines’ Cost Struggles

Good morning from Skift. It’s Wednesday, February 8. Here’s what you need to know about the business of travel today.

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Episode Notes

Spirit Airlines has succeeded in becoming a popular option for budget travelers in large part because of its ability to keep costs low. But the company is struggling to control costs ahead of its pending merger with JetBlue Airways, reports Jay Shabat, senior analyst at Airline Weekly, a Skift brand.

Shabat cites a new pilot contract as one reason the company has seen costs substantially rise since the fourth quarter of 2019. In addition, Chief Financial Officer Scott Haralson acknowledged during its fourth quarter earnings call on Tuesday that constraints like air traffic control congestion have driven Spirit to fly more during off-peak periods.

Spirit reported a 4 percent operating profit margin during the fourth quarter, which Shabat writes was identical to what JetBlue reported for the same period. Although Spirit has assured investors that 2023 will be a profitable year for the company, Shabat notes the carrier’s future performance will depend on its merger with JetBlue.

Next, Hertz is overhauling its car rental brands Dollar and Thirty to help boost sales from price-conscious business travelers, reports Corporate Travel Editor Matthew Parsons.

Hertz CEO Stephen Scherr said during its fourth quarter earnings call on Tuesday that Dollar and Thirty aren’t living up to their potential. He added the two brands aren’t doing a good job of reaching price-conscious consumers who less frequently. Parsons writes growth in that sector would be a plus for Hertz, which has already signed new contracts with most of its existing corporate customers.

Hertz generated $2 billion of revenue during the fourth quarter, a 4 percent increase from the same period in 2021. The company also recorded a net income of $116 million.

Finally, as destinations across Africa are looking to de-emphasize safari tourism, Contributor Harriet Akinyi reports several African nations are increasingly investing in a rapidly rebounding cruise tourism market.

As the cruise tourism industry is poised to make a complete recovery worldwide by the end of 2023, Akinyi cites Kenya as one country seeking a major economic boost from the sector. A cruise terminal in Mombasa has already welcomed three ships since opening in late November, and Kenyan authorities expect three more cruise ships to dock there by the end of March. One Kenyan official said visitors arriving on a ship in December would inject $800,000 into the local economy.

Akinyi writes that African destinations investing in cruise tourism will be looking to emulate the success of Cape Town, South Africa. The sector generates roughly $16 million annually for the city’s economy.