Spirit files for bankruptcy as no-frills carriers struggle to capitalize on the travel boom
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Low spirits… Spirit Airlines, known for budget fares and bare-bones service, became the first major US carrier to file for bankruptcy in over a decade. Despite all the extra fees it charges for bags, seat selection, and even water, Spirit hasn’t posted an annual profit since 2019. It’s lost $2.2B since early 2020 as its costs surged and fares fell in an oversupplied US market. Its problems got worse this year when a federal judge blocked its plan to get acquired by JetBlue.
Baggage: With no one to take it under its wing, Spirit was left alone with $1B+ in upcoming debt payments. The stock plunged ahead of its delisting from the NYSE.
Next steps: Spirit said it expects to continue operating and exit bankruptcy early next year. Its CEO tried to reassure customers that they can still book and fly.
Melting ice to get free water…. Customers have stomached Spirit’s no-frills service in exchange for low fares. Spirit’s model pressured other major airlines to lower their fares and offer more budget-friendly tickets (think: basic economy). But since the pandemic, Spirit and other discount carriers like Ryanair have struggled to capitalize on booming revenge travel. This summer was the busiest ever for airlines, but Spirit couldn’t turn the demand into financial gain. Though its passengers grew in the first half of the year, sales fell because fares were down 20%. Meantime, labor costs ballooned as pricing competition heated up.
Flexibility is power… Larger airlines like Delta Air Lines and United offer everything from basic economy to first class, allowing them to attract both budget flyers and big spenders. Since premium and international fares are the biggest moneymakers, larger carriers capitalized on the travel boom and offset rising costs (unlike Spirit). In July, Spirit expanded its tiers and introduced a perk-filled package to compete with premium airlines, but it may’ve been too late.