Spirit’s woes reveal the dismal state of America’s budget airlines

Budget airlineslcclcclcclccLCClcclcclcc are rarely loved by passengers. Cutting costs to the bone and charging for every conceivable extra makes for cheap fares but often unpleasant journeys. Few will therefore have much sympathy for the tribulations of Spirit Airlines, perhaps America’s most despised low-cost carrier (), which filed for chapter 11 bankruptcy protection on November 18th. Yet its failure, which illustrates the parlous state of , should worry travellers.Spirit is the first big carrier in the country to go bust since American Airlines in 2011. Back then American blamed high fuel and labour costs, sagging demand and growing competition as s expanded rapidly on domestic routes. Spirit, currently America’s seventh-largest flyer by passenger traffic, can also blame pricey fuel and labour. But this time demand for flying is growing, and the competition is instead coming from legacy carriers.A busy year for flying in America has not translated into profits for most budget airlines. Passenger numbers in North America are forecast to hit 2.2bn in 2024, a 7% increase on 2023, the year when flying regained its pre-pandemic altitude. Yet with the exception of Southwest, which now operates more like the legacy carriers it once sought to disrupt, America’s other big budget airlines—Frontier, JetBlue and Allegiant—all made losses or the slimmest of profits in the third quarter.Spirit has not turned an annual profit since 2019. It has suffered alongside other s from a glut of seats and a resulting slump in ticket prices; its average fare was down by 19% in the first half of the year, compared with a year earlier. Since then the s have made swingeing cuts to capacity. Although analysts at Deutsche Bank expect overall domestic airline capacity in America to grow by 1.6% in the three months to December, compared with the previous year, capacity is projected to contract by 5.3% for s.The problem for Spirit and other s has been a change of strategy by legacy airlines, which have been faring comparably well. Legacy carriers are filling up their planes by offering cheap fares of their own. They are also in a better position to cater to the shifting preferences of consumers that have tired of budget flying. More passengers are now willing to pay extra for a little pampering, such as a free drink or two. Attempts by s to offer more upmarket travel, such as introducing business fares and more lenient rules about luggage, seem to have had little impact so far.Spirit’s difficulties were compounded by the hefty debts it took on during the pandemic and a level of service frequently among the worst in the industry when it came to late flights and lost luggage. Its managers may also have been distracted by a failed effort to merge with Frontier Airlines announced in early 2022. That deal was scuppered by a counter-offer from JetBlue, which then abandoned its courtship in March after a judge deemed that the deal was anti-competitive, given the overlap between the pair’s routes.Spirit hopes to emerge from bankruptcy early next year and will continue to operate while it restructures. Frontier has dismissed rumours that it will revisit the idea of a merger. Such a deal could have given the two budget carriers a fighting chance against America’s ascendant legacy carriers. As Keith McMullan of Aviation Strategy, a consultancy, notes, a tie-up would have created a carrier with 75m passengers a year, getting on for half the size of Ryanair, Europe’s budget champion. An American with such competitive heft would surely have been appreciated—even if not loved—by the travelling public.