Spirit bets on premium travel in a bid to turn around its business

By Shivansh Tiwary and Rajesh Kumar Singh

(Reuters) - Spirit Airlines unveiled plans on Tuesday to tap into a growing demand for premium travel as the no-frills carrier chases high-margin revenue to mitigate cost pressures and boost its earnings.

The Florida-based ultra-low-cost carrier will offer intra-Europe style business class seats with a guaranteed blocked middle seat. The seating option includes one carry-on bag, one checked bag, priority boarding, and a snack and non-alcoholic beverage.

The airline has been losing money despite booming travel demand, raising questions about its ability to manage debt that is due to mature in 2025 and 2026.

Its shares have fallen 81% this year. They were, however, up 5% in mid-day trade on Tuesday.

Spirit's move comes months after rival Frontier Airlines launched a similar product. Both the carriers need new revenue streams to drive up earnings.

The product, however, marks a shift away from their traditional business model which offers a no-frills experience at rock-bottom fares and charges heavily for ancillary services.

A greater willingness on the part of air travelers to pay up for more comfort and a better experience has prompted U.S. carriers to find ways to attract them.

Southwest Airlines last week said it will end its brand-defining seating policy and start offering assigned and premium seats.

While travel demand remains strong, an excess supply of airline seats in the domestic market has dampened airfares, making it harder for carriers to mitigate a run-up in labor and other operating costs.

Airlines such as Delta and United have been leaning on high-margin premium travel to protect their profit.

Delta reported a double-digit increase in revenue from its premium cabins in the second quarter, while sales in its main cabins remained flat.

Spirit will launch the business style seats on Aug. 27. The seats will be available for bookings starting Aug. 16.

It said there will be four new travel options, including plans for priority check-in, seats with extra leg-room and online streaming access through in-flight Wi-Fi services.

Spirit, which reports earnings on Aug. 1, did not provide revenue estimates from its new product offerings. The airline is expected to post an adjusted loss of $1.36 per share in the second quarter, according to LSEG data.

(Reporting by Shivansh Tiwary in Bengaluru and Rajesh Kumar Singh in Chicago; Editing by Shounak Dasgupta, Krishna Chandra Eluri and Chris Reese)