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The rise and fall of Spirit Airlines: A billion-dollar mistake

The airline that hit 12% profit margins—higher than Delta, United, or Southwest—then filed bankruptcy twice in nine months.
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By The Numbers

12%
profit margin at peak
$1.2B
loss in 2024
$795M
debt at first bankruptcy

What They Nailed Early

Created America's first ultra-low-cost carrier by unbundling everything—bags, seats, snacks—and generating 40% of revenue from fees. Counterpositioned perfectly against legacy carriers stuck with bundled service models. By 2015, Spirit had higher margins than any U.S. airline.

What Changed

Competitors didn't stand still. Legacy carriers launched basic economy fares, targeting Spirit's customers while keeping premium revenue. Other ultra-low-cost carriers like Frontier copied the model on the same routes. Spirit tried to grow aggressively—adding a third more capacity since 2019—but years of underinvestment caught up. Infrastructure built for 50 planes was running 167.

Where it Landed

Chapter 11 bankruptcy twice—November 2024 and August 2025. Shrinking from 200 planes to potentially half that. The ultra-low-cost model that once dominated is now fighting for survival.

The Principles

1. 
Temporary advantages aren't moats. Spirit's unbundling worked until legacy carriers just copied it with basic economy, eroding the entire competitive edge.
2. 
Infrastructure scales slower than ambition. Running 167 planes on systems built for 50 led to a 10-day meltdown, 2,800 cancelled flights, and $50M in losses.
3. 
Being hated has strategic value. Spirit entering a market dropped competitor fares 20%—proof that even unloved businesses can create consumer surplus at scale.

Builder's Takeaway

3 warning signs your competitive advantage is temporary:
• 
Competitors can copy your model without cannibalizing their core business
• 
Your edge depends on others not responding, not structural barriers
• 
Growth outpaces operational capacity—systems break before economics do
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