If you’ve been keeping up with airline industry news lately, you already are well aware that the longevity of budget airlines seems to be up in the air. The most prominent example is the struggling Spirit Airlines. One of the most well-known low-cost carriers, Spirit was in the process of being purchased by JetBlue when a court ruling blocked the merger last week. The decision was done with the consumer in mind, as the judge ruled that JetBlue purchasing Spirit would reduce competition between airlines and increase prices—a classic example of antitrust violations, for those of you who haven’t brushed up on 11th grade history for a minute (me).
But now that the sale has been blocked—at least for now, since JetBlue has already launched an appeal of the decision—Spirit’s fate is unknown, as some industry experts posit the airline could face bankruptcy. Spirit is not alone in its financial struggles— other low-cost carriers including Frontier and powerhouse Southwest have reported lower returns compared to legacy carriers like American, United, and Delta recently.
To get a sense of what these airlines’ struggles could mean for travelers, we asked Katy Nastro, Going‘s resident travel expert what we should be expecting.
“Budget airlines are not immune to financial hardships, but that also doesn’t mean they will automatically disappear,” Nastro told Thrillist. For one, the presence of budget airlines are essential for keeping fares competitive, and have continued to grow.
“For example, in 2016 according to two analysts Kasper and Lee, if Southwest flew on a route, it helped lower fares by over 20%,” Nastro explained. “In 2023, low-cost carriers made up 14% of the domestic market share, up from 2% over two decades ago.”
From Nastro’s explanation and the reasoning behind the judge’s antitrust ruling, it would certainly benefit larger legacy airlines if budget airlines were to go the way of the dodo, but that’s not really what this latest industry news is indicating.
The impact of a mass budget airline extinction would likely vary widely depending on which routes and destinations are involved.
“If low-cost carriers were to disappear, the effects most likely would be felt in areas where their footprint was the largest,” Nastro said. “For example, Las Vegas is one of the best airports for cheap flights because it has so much variety in airline competition. Allegiant, Frontier, Southwest, and Spirit all fly there, along with others. If just these four were to disappear, the likelihood of Vegas seeing fewer deals is high, due to decreased competition. Conversely, if we looked at John F. Kennedy in New York, Allegiant and Frontier disappearing wouldn’t necessarily have a big impact since they don’t fly there.”
So we could expect to see a big jump in prices on certain routes, but on routes where there’s already not much presence from budget airlines, prices likely wouldn’t change dramatically. That makes sense, and definitely makes the case that having multiple airlines serving one airport as a positive for the consumer.
That doesn’t mean that budget airlines will always be the cheapest option, it should be noted. “Sometimes overall prices on budget airlines aren’t as low as the other carriers. They may charge a lower base fare, but their ancillaries (fees like seat selection, bags, etc.) are where they make money,” Nastro said. So even if the presence of a budget airline is bringing down prices, those carriers might not always offer the lowest prices for a given route.
There are plenty of reasons for budget airlines not having as much success as their legacy competitors right now. Nastro says that one contributing factor is that competitors have more connectivity than smaller airlines. For example, none of the ultra low-cost airlines offer flights across the Atlantic—so consumers seeking out trips to Europe are going to shop elsewhere for those flights.
“People’s travel tastes have shifted from the middle of the pandemic when a lot of us only felt comfortable flying domestically,” Nastro explained.
Plus, the information we’re seeing now is mostly based on one quarter of financial reports. “It’s also not uncommon for airlines to report Q4 losses which often reflect tickets booked for further out travel,” Nastro said. “January and February are slower months for travel overall, which doesn’t help any airline’s bottom line.”
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