Sky's The Limit

Despite Spirit's early success, the ride wasn't always a smooth one. "In the period of time following the ValuJet accident in 1996, we got hammered [and lost customers]," says Homfeld.

With smaller carriers hurt by the fallout of the ValuJet disaster, Homfeld says the major airlines set out to exploit their weakness. "The homicidal tendencies of competing airlines drove us to a point where a considerable portion of our retained earnings evaporated in a very short time," he says. Airlines increased capacity in the routes they shared with Spirit, Homfeld says, and reduced their prices to beat Spirit's. "And they began giving extra frequent-flier miles to passengers flying on routes we were flying in order to move passengers off our flights and onto theirs. In some markets, they were very successful."

But Homfeld didn't waste a minute regaining his footing. "Small airlines are unique in that they can move quickly. [So] we dropped markets, changed markets and moved more aircraft into charters," he says. Spirit also dove into advertising that stressed brand rather than prices. To get passengers to identify on a personal level with the airline, Spirit's pilots, flight attendants and mechanics were featured in its TV commercials.

This was a change from the company's early strategy. Up until the 1996 air war, Spirit Airlines had purposely been moving slowly and staying in the shadows. "We kept a low profile so competitors wouldn't jump on us. If we were invisible to them, then we could exist without them attacking us too much," explains Homfeld. "Travel agents were [largely unfamiliar] with us. We were not available in [their reservations systems]. We didn't do press releases or have parties for travel agents or go to a lot of travel shows; we did most of our marketing by direct mail. And we were successful without doing all that. But once it became obvious that we were being aimed at, we changed our whole method. If we were going to be shot at anyway, we wanted to make sure as many people knew about us as possible."

One of Homfeld's changes was to seek more business from travel agents, who are now responsible for 40 percent of Spirit's bookings. "After all," Homfeld says, "it's like having an [automatic] referral in the marketplace. One travel agent can talk to 100 people in a week. I can't." And while larger airlines are cutting back agents' commission amounts--and alienating them in the process--Spirit Airlines is engaging their support with a focus on sales incentives, including a moderately priced golf vacation program that comes with a 10 percent commission.

This article was originally published in the August 1999 print edition of Entrepreneur with the headline: Sky's The Limit.