EntreLeadership - The Business Decisions That Broke Spirit Airlines

Episode Date: September 2, 2026

📝 Shape what comes next for the EntreLeadership show by participating in our 2026 audience study. After you  complete the survey, you can enter for a chance to win a Standard ticket to EntreLeadership® Summit 2027.   Spirit Airlines didn’t collapse overnight—the warning signs were years in the making.  In this episode, Head Coach John Felkins unpacks Spirit’s rise and fall to reveal how a successful business can become dangerously fragile when it stops adapting and leaves no margin for the unexpected.   Next Steps: ·      📚 ⁠Order Dave’s most recent EntreLeadership book, Build a Business You Love. ·      🎥 Watch our video The Four-Part Framework to Creating a Bulletproof Business. ·      🎯 Not sure what to do next in your business? Let’s figure it out together. Book a free 30-minute consult call with the EntreLeadership Team. ·      📞 Have a question for the show? Call 844-944-1070 or send us a message. ·      📧 Get EntreLeadership’s free weekly newsletter: expert advice and practical tips from the same playbook we used to build Ramsey Solutions into a $300 million company. ·      🌎 Attend our world-class leadership conference, EntreLeadership Summit. ·      📝 Stop guessing. Get a plan built for your business and someone who holds you to it. Find out which coaching option is right for you. ·      📈 Bad hires. Strategies that never get off the ground. 60-hour workweeks. Sleepless nights. EntreLeadership Master Series is where you trade all of that for the exact systems our Executive Team used to scale to $300 million. Don’t wait until seats are sold out.   Connect With Our Sponsors: ·      Go to Belay Solutions or text ENTRE to 55123 for their free resource! ·       See if Christian Healthcare Ministries Groups are the right fit for your organization. ·      Visit NetSuite today to learn more.   Listen to More From Ramsey Network: 🎙️ The Ramsey Show 💸 The Ramsey Show Highlights 🧠 The Dr. John Delony Show 🍸 Smart Money Happy Hour 💰 George Kamel   Ramsey Solutions Privacy Policy Learn more about your ad choices. Visit megaphone.fm/adchoices

Hey everybody, I would like to ask for your help with something really important. I want you to be able to shape what comes next for the Entree Leadership Show by participating in our 2026 audience survey. You need a text Survey to 33789 to get the link or go to ramsysolutions.com slash survey. Once you've completed the survey, you can enter for a chance to win a standard ticket to the Entree Leadership Summit event in 2027. The survey closes September 30th.

Listen, this is a big deal. We want this show to be what you want it to be. So let us know. You probably saw the headlines. Spirit Airlines ceasing operations. 17,000 employees out of a job overnight. Thousands of people stranded. Everyone blamed the fuel prices.

The war in Iran. But that's not the real story. As you're about to find out, if you're not careful, the very thing that helped get your business off the ground can also be what destroys it. And if it can happen to a major player like Spirit, it can happen to any business. So today, Entre Leadership's head coach, John Falcons,

is breaking down what really happened to Spirit Airlines and how to avoid making the same mistakes they did. Let's get to it. Spirit Airlines started in 1983 as Charter One Airlines. It was a small charter operation that flew to Vegas, Bahamas, and a few other tourist spots. Nothing fancy. They officially became Spirit Airlines in 1992, but they struggled early on because it was hard to compete against the bigger carriers. Then, in the mid-2000s, they went all in on a new strategy.

Under a new CEO, they became the first ultra-low-cost carrier in the U.S. Their slogan was, home of the bear fare. No perks, no extras, just dirt cheap ticket prices. And it worked. Budget conscious travelers showed up. That allowed Spirit to expand their routes while keeping operating costs lower than anyone else. It was also during this time that Spirit rolled out the bright yellow branding

that would become their hallmark. And by 2015, they were the most profitable airline in the country. So how does America's most profitable airline end up shutting down just 11 years later? Well, there were three massive mistakes Spirit made that eventually led to their collapse. And the first happened right out of the gate. Mistake number one was they built their entire identity

on being the cheapest. That was their whole value proposition. Not the friendliest, not the most comfortable, just cheap. Now, I get why that seems like a smart way to outdo the competition, but here's the problem. When being the cheapest is your only advantage, you can't raise your prices without pissing off your customers. And it left the door wide open for the big carriers to copy their playbook. American, Delta, and United started offering basic economy tickets and a handful of ultra-cheap seats per flight.

Not the whole plane, just enough to give budget flyers another option. That meant spirit had to keep their planes full if they wanted to stay profitable. Then came COVID. empty planes, nobody was flying, and their revenues tanked. They spent the next six years trying to pull out of a nose dive. The lesson here is simple. Competing on price alone is a race to the bottom, and Spirit hit it. Customers don't just want to pay less.

They want to feel like they're getting the most for their money. People will choose their competitor and gladly pay them more if the experience is better, which leads me to Spirit's second mistake. customer experience sucked. Having the cheapest price meant stripping out pretty much everything that makes flying tolerable. Spirit's whole experience was about as bare bones as you could get. They had cramped seats that felt like you were sitting on plywood, no free snacks, no free carry-on, no free seat selection. So how did they stay profitable for so long? Fees. They feed their customers to death. In fact, they made more per customer on

fees than the actual ticket sales. By 2015, optional fees accounted for more than 43% of the revenue. They even gave gate agents a $5 bonus for every oversized carry-on they flagged. So, as you can imagine, things got a little intense at the Spirit Gates. Passengers were squeezing bags into the metal bag-sizer with all their might. They were arguing with gate agents about whether or not their backpack was really too big. and some of them were even wearing three jackets and shoving souvenirs into their pockets. Anything to avoid paying another $70 to check their bag at the gate. So it's no surprise that in 2015, they had the highest passenger complaint rate of any major U.S. airline by far.

People continued to fly Spirit because it was cheap, but they hated doing it. And when travel bounced back after COVID, Spirit never fully recaptured that customer. customer base. People remembered how it felt to be treated so poorly, and they were now willing to pay more just to avoid that crappy experience. People might come to you for the price, but they continue to come back to your business because of the experience. And if every interaction with your business leaves people frustrated, don't be surprised when they walk away the second a better option shows up. As Spirit Airlines showed, just being cheap isn't a strategy. In the same way. Your team is worth every dollar you invest in them. And behind payroll, health care is one of the

biggest expenses a business has. That's why I want to tell you about Christian Healthcare Ministries Groups Program. It's a faith-based alternative to traditional health insurance, where members help pay each other's medical bills. It's a great option, not only for individuals, but also for small businesses to care for their people in a way that's effective and affordable. Whether you're a church, a nonprofit, a school or a family business. Many organizations report saving 30 to 50% compared to traditional health insurance. Of course the goal isn't just cutting costs.

It's being a wise steward of the resources you've been given. CHM has over 700 participating groups and they offer flexibility for companies of different sizes. So if you're responsible for your organization's health care benefits, contact CHM. One of their representatives will walk you through your options, and help determine whether the groups program is a good fit for your specific situation. Go to CHministries.org slash entree or call 1-800 join CHM.

So the first two mistakes that Spirit Airlines made were bad enough, but it's really the third one that sent them into a tailspin. Spirit bet on debt right before everything fell apart. Now let's back up to 2019. At this point, Spirit was still flying high, business was growing and leadership was convinced the ultra-low-cost model would keep them profitable for years. So they doubled down. They committed to leasing over 100 new Airbus planes,

betting that growth would continue and they'd pay it off over time. By the end of 2019, Spirit was already carrying about $2.2 billion in debt. That's a risky place to be for any company. But it's especially risky when your whole business strategy depends on full planes and low costs. Then came 2020. Nobody was flying, but Spirit was still on the hook for hundreds of millions of dollars in aircraft payments. Then things got even worse when those brand new Airbus planes were grounded because of a massive recall due to engine problems. Suddenly, dozens of planes were sitting on the tarmac waiting for repairs.

not making a dime. And by the end of 2023, Spirit's debt had grown to over $3.3 billion. That's roughly a 50% increase in four years. Spirit had treated debt as leverage. But when things went sideways, it became a huge liability. Every loan payment, every lease

limited their ability to pivot when they needed it most. And when a crisis hit, that was the difference between surviving the storm, or shutting their doors for good. That is why we always say the healthiest businesses grow at the speed of cash. So Spirit was left with a fleet it had to pay for, a customer base that hated them,

and billions of dollars in debt. And here's the crazy part. After COVID, Spirit generated the highest revenue in its history. But revenue isn't the same thing as profit. Travel demand came roaring back. and higher airfares pushed sales to record levels. But Spirit's costs were rising even faster. Labor got more expensive, fuel prices climbed,

interest in aircraft payments kept coming due, and every dollar they made seemed to go right back out the door. The business looked bigger than ever, but it had never been more fragile. So, Spirit was looking for a lifeline. First, Frontier tried to merge with Spirit, But shareholders rejected that deal. Then JetBlue stepped in with an offer that Spirit accepted.

But the Department of Justice sued to block the merger, saying that it would reduce competition and violate antitrust laws. For a couple of years, Spirit limped along, going in and out of bankruptcy a couple of different times. But then came the war in Iran. Fuel prices doubled, and that was already Spirit's biggest operating expense. There was no more runway left to recover.

And just like that, after more than 40 years, Spirit came to an end on May 2, 20206. It was so abrupt that some pilots learned the airline was shutting down while they were still in the air, and they had to break the news to passengers once they landed. By the next morning, every remaining Spirit flight was canceled, stranding thousands of travelers, and employees found themselves out of work

with virtually no warning. There was even one Spirit pilot, who never got to fly his retirement flight because it was canceled. Instead, he flew home as a passenger on Southwest Airlines. After the crew learned his story, they surprised him with the send-off spirit never got to give him. Spirit Airlines shut down overnight, but its downfall was actually years in the making.

And here's the deal. You can't predict the next crisis. None of us can. But what you can do is build a business that's strong enough to take a hit. Fuel costs didn't kill Spirit. They just exposed how fragile the airline already was. The cheapest price, the worst experience, the thinnest margin for air, it may have worked for a while.

But the second they hit major turbulence, it all fell apart. And what's wild is that Spirit basically predicted its own downfall. In their 2019 SEC filing right before COVID, the company warned that its ability to survive depended on stable fuel prices. access to financing, a healthy economy, and its business strategy continuing to work. In other words, they were betting on everything going right, and then almost everything went wrong. So here's what you can learn from spirits failure. Don't build your business fast. Build it to last.

Win customers because they genuinely love doing business with you, not because you're the cheapest option. Grow at the speed of cash, not debt, and leave you. Leave yourself enough margin to handle the unexpected, because the unexpected will happen. And if this story taught us anything, it's that the decisions that you make in the early days of your business can shape where you end up years from now. That's exactly what Dave Ramsey's book, Build a Business you love, is all about. It'll teach you how to build the kind of foundation that supports long-term growth and avoid the kind of mistakes that Spirit Airlines made. You can check that out by using the link in the description. Spirit fell into the same trap that some high-performing businesses do.

Complacency. They dug their heels in and protected the strategy that made them successful until he didn't. And all it takes is one crisis to bring down everything you've worked so hard to build. Because when the tide goes out, you can always tell who's skinny dipping. So if you want to know exactly how to weatherproof your business to withstand any crisis, check out this next video. And if you've enjoyed this episode, be sure to like, share, and subscribe for more real-world content. I'm your host, Dave Ramsey, and this is Entree Leadership.