Spirit Airlines faces tough road after JetBlue merger falls through

Ultra-low-cost airline Spirit Airlines has its work cut out as it plots a future after the collapse of its $3.8b merger deal with JetBlue Airways. The airline has lost money for the past six quarters despite booming travel demand, and expects operating margins to drop as much as 15% in the current quarter. Analysts and industry officials say the airline will have to make drastic changes to become profitable, which is still not likely to happen this year. "Strategically, the company is challenged," said Jonathan Root, senior vice president at Moody's. "They have to lower their costs." That would mean cutting flights and exiting some markets, which would reduce its landing fees and airport charges, as well as lower fuel costs. Spirit is already taking some of these steps. The company has said it is adjusting its growth profile and has pulled flights out of markets like Denver and New Hampshire. The JetBlue merger would have created the fifth-largest U.S. carrier and potentially ensured the survival of Spirit. But the two carriers concluded there was no path forward after a US judge blocked the deal in January on anticompetition concerns. After calling off the merger on Monday, Spirit said it is confident in its strengths and is focused on returning to profitability. Industry experts say Spirit needs to do more. Excess capacity in key markets is hurting Spirit's pricing power, forcing the airline to discount heavily to fill planes. Average fare per passenger was down 25% in Q4 from a year earlier.<br/>