Spirit Airlines Is Branching Out as It Keeps Expanding | host.madison.com

After a multiyear run of stellar profit growth, Spirit Airlines (NASDAQ: SAVE) has faced increasingly severe margin pressure over the past two years. The company’s operating margin is on track to sink to 15% or less in 2017, down from a peak of 23.7% in 2015.

Spirit’s recent woes have been driven primarily by abrupt pricing strategy shifts by American Airlines and United Continental. Both legacy carriers have started to compete aggressively on price with budget carriers like Spirit, driving down fares in big hub markets like Chicago, Dallas/Fort Worth, and Houston.

Spirit Airlines has faced price-matching campaigns from larger rivals recently. Image source: Spirit Airlines.

However, Spirit Airlines has ample ability to adapt to the industry conditions it now faces. Most notably, it is shifting its route network to reduce its exposure to the competitive dynamics in any one or two major hub cities.

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Spirit Airlines Is Branching Out as It Keeps Expanding | Business Markets and Stocks News | host.madison.com.