Spirit Airlines: Turbulence at America's Low-Cost Carriers

The recent bankruptcy of Spirit Airlines, one of the most well-known low-cost carriers in the USA, highlights the challenges facing the low-price segment. Despite the attractively low ticket prices, passenger comfort is often neglected, which is not exactly beneficial for Spirit's image. That the company filed for Chapter 11 bankruptcy on November 18 is not surprising in this context. However, it also shows the precarious situation of the entire American low-cost airline industry and raises concerns among travelers. Spirit Airlines is the first major airline in the USA since 2011 to have to file for bankruptcy when American Airlines capitulated at the time due to high fuel and personnel costs as well as growing competition. Today, the price pressure from expensive fuel and labor costs remains, yet demand in the flight sector is growing. The competition primarily comes from established airlines, which score with cheaper offers and better adaptation to changing consumer needs. Although passenger numbers in North America are expected to rise by 7% to 2.2 billion by 2024, most low-cost providers hardly achieve profits. Southwest, as a former challenger to established airlines, is now generating more stable profits. In contrast, companies like Frontier, JetBlue, and Allegiant reported losses or only minimal profits in the third quarter. Spirit Airlines has not been able to post annual profits since 2019, due not least to falling ticket prices and reduced capacities. Legacy carriers are sustainably influencing the market with their own low-cost offers and optimized service quality. Consumers are increasingly willing to pay for more comfort, overshadowing the attempts of low-cost airlines to score with better offers and business travel packages. For Spirit, the problems were compounded by pandemic-era debts and insufficient service quality. Distractions from failed merger plans with Frontier may also have taken their toll. Spirit Airlines plans to emerge strengthened from bankruptcy by the beginning of next year, while Frontier strictly rejects renewed merger discussions. A merger could have created a strong position against the established airlines. Such a giant might not have won the hearts but at least the favor of the traveling public.