How bleak is the future for low -cost airlines?
For decades, budget carriers offered no frills, cheap flights for passengers. But that Scrappy business model is now eroding as costs of ascending and passengers choose more comfortable seating and wide upgrades.
It seems that the business can't even merge itself out of its tail.
Earlier this week is Spirit Airlines (Saveq) Once again a procurement proposal was rejected by Frontier (Ulcc), worth $ 2.16 billion. The proposal was similar to the same border tabled earlier this month. He opposed a spirit, but his proposal was refused.
FRONTIER's first occupation application in 2022, for $ 2.9 billion in cash and stock, was ruined by offering $ 3.8 billion by a competitive jetblue (Bled). Spirit filed for bankruptcy in November after a federal judge sided with the Justice Department to block it with Jetblue.
The low -cost carrier model works by offering cheaper seats than traditional airlines to domestic and close US destinations when charging items such as checked bags, seating seating, and snacks or drinks. The airlines often use secondary airports with lower landing fees, such as Long Beach Airport in Los Angeles instead of Lax.
But between more competition from traditional carriers in domestic routes and increased labor and maintenance costs, the low -cost model has slowly unveiled.
For example, in the midst of active investors last year, south -west (Luv))) published It would still end its decades of open seats as part of a new strategy to grow revenue. Meanwhile, in January, border also announced that he would start a proposal Upgrade seat and top quality seats by the end of 2025.
“That ultra-cost model has disappeared because they do not have ultra-low costs,” flight consultant Mike Boyd, President of Boyd Group International, told Yahoo Finance.
“The model,” he added, “evaporates.”
The prospects for the industry are not encouraging for investors. Jetblue stock recently collapsed After the disappointing 2025 forecast for the aviation company Wall Street. Jetblue referred to higher costs and lower than expected revenue in its fourth quarter results.
And late last month Southwest CEO Bob Jordan said the airline was “experiencing higher unit cost inflation, most especially in pay rates driven by the market, airport costs, and care health. ” Jordan referred with a cost reduction target of $ 500 million for 2027 unveiled at the company's investors day last quarter, saying, “We will be unmatched in pursuit of costs.”
The cost woe is reflected in stock prices: the ultra-low-cost carriers have, for the most part, underperformed the wider airlines market.
