In a sad development that should surprise no one, Spirit Airlines management has raised concerns about the company’s ability to continue operating…
In this post:
“Substantial doubt” about Spirit’s ability to continue operating
Pre-pandemic, Spirit was one of the best margin airlines in the industry. During the pandemic, the industry changed — labor costs went up, and consumer preferences evolved, in favor of premium and long haul travel. Most of the industry profits also come from loyalty programs, which limits the viability of smaller carriers.
Then we saw JetBlue try to acquire Spirit, in order to allow JetBlue to be more of a national competitor. However, that deal was blocked by regulators, who argued it was anti-competitive. We eventually saw Spirit file for Chapter 11 bankruptcy, which was a very quick process.
While Chapter 11 bankruptcy helped Spirit with its immediate debt, it didn’t change the fact that the airline was hemorrhaging money, and had terrible operational losses. As I’ve covered several times before, the airline is burning through cash, and that can only be sustained for so long. The company has now seemingly confirmed that.
Spirit is trying to decrease costs and increase revenue however it can, ranging from introducing more premium seating, to furloughing pilots, to selling aircraft and leasing them back. Now the company has yet another issue.
Spirit is in discussions with representatives of its credit card processor, which has requested additional collateral to renew its credit card processing agreement, expiring on December 31, 2025. The level of collateral required to be posted “could result in a material reduction of unrestricted cash.”
That brings us to the company’s warning — “because of the uncertainty of successfully completing the initiatives to comply with the minimum liquidity covenants and of the outcome of discussions with Company stakeholders, management has concluded there is substantial doubt as to the Company’s ability to continue as a going concern within 12 months from the date these financial statements are issued.”
It’s also worth noting that cash and cash equivalents at the airline have declined to $407.5 million, reflecting how quickly the airline has been burning through money. That’s not surprising, because unfortunately Spirit’s margins have worsened, rather than improved, in recent times.
There’s nothing surprising here… what can we learn?
I have huge respect for the impact Spirit has had on the industry. It’s a great company that often unfairly gets a bad rap. Unfortunately math is math, and the company’s business model just doesn’t work anymore.
Quite honestly, I really don’t understand what Spirit management has been thinking for the past several years (both before and after bankruptcy), as I haven’t actually seen a true “turnaround plan” attempt. The only turnaround I’ve seen basically consisted of eliminating fees and becoming a more inclusive carrier, but that wasn’t a solution either, and only worsened the company’s margins.
Next, if Spirit does unfortunately go out of business, I’m curious what that means for the industry. Presumably it would be good news for Frontier and JetBlue — it would strengthen JetBlue’s position in Fort Lauderdale, and it would give Frontier a bit more power among the ultra low cost carriers.
Lastly, I really think think the whole Spirit situation is something that regulators should learn from. Keep in mind how the Department of Justice sued to block JetBlue’s takeover of Spirit. While JetBlue was way overpaying for the deal, I think there was huge merit to it in general. We need more “national competitors” that can take on the “big four,” and that would’ve accomplished exactly that. But a judge ruled that takeover violated the Clayton Act, and as he concluded:
Spirit is a small airline. But there are those who love it. To those dedicated customers of Spirit, this one’s for you. Why? Because the Clayton Act, a 109-year-old statute requires this result –- a statute that continues to deliver for the American people.
That’s not looking so good anymore, is it? My point is to say that when we talk about consolidation in the airline industry, it needs to be based in reality, and take into account the industry’s challenging economics. The logic can’t be “we demand Spirit continue operating independently at a negative 20% margin!”
Bottom line
Spirit Airlines has warned that its credit card processor is requesting more collateral to renew its contract beyond 2025, given the carrier’s financial situation. The company has stated that “there is substantial doubt” as to its ability to continue operating, as it continues to burn through cash.
This shouldn’t come as a surprise, since we’ve known how much money Spirit has been losing, and the situation has only become worse. I think far too many people dismiss the impossible reality that so many smaller US carriers are finding themselves in. Of course we all want low fares, but airlines can only lose money for so long before the other shoe drops…
What do you make of this Spirit situation?
In my personal opinion it's a matter of the traveling public wanting a better and or upgraded experience. I live in a major Southwestern City and have choices from 21 scheduled carriers, including Spirit. Out of the 21 airlines 7 are international only (BA,Air France etc.) That leaves me with 14 carriers to chose from. Obviously price is a factor but 99% of the flights are all in the same ball park. Schedule, frequency, and...
In my personal opinion it's a matter of the traveling public wanting a better and or upgraded experience. I live in a major Southwestern City and have choices from 21 scheduled carriers, including Spirit. Out of the 21 airlines 7 are international only (BA,Air France etc.) That leaves me with 14 carriers to chose from. Obviously price is a factor but 99% of the flights are all in the same ball park. Schedule, frequency, and backup options all matter. Spirit fails most of that criteria in my opinion. I know this is my personal preference but I want to know what the total price is when I purchase a ticket. I don't want to pay extra for ketchup on my fries! In my location I have the option of taking several non stop flights to most destinations. I am not knocking Delta here but from my location I would be required to fly through ATL, or DTW, MSP to get back east(BDL) all of those hubs are non starters for me. The point of this missive is to say consumers have choice and at the moment the vast majority of consumers want choice and quality, all of which is missing on Spirit. My one flight on Spirit turned into several rude encounters with staff, a cancelled return flight and a last minute high fare on AA back home. Never did get a refund.
"I really think think the whole Spirit situation is something that regulators should learn from."
That's operating under the assumption that "saving" it would be best for the industry, which is unproven at best, and could be entirely false overall.
it is worth noting that Spirit Airlines stock (FLYY) is down 43% so far today while most of the rest of the US industry is up high single digits to low double digits.
ULCC (Frontier) is up almost 20%.
Investors understand that eliminating a competitor that generates a low single digit amount of industry capacity would benefit the industry as a whole
No sh!t. If Grocery store 1 goes out of business, then even the most uneducated Deltoid can understand that Grocery store 2 is going to have more business.
You're regular Gordon Gekko, moron.
your fixation w/ me to the exclusion of dealing w/ the facts IS the problem w/ airline social media, including this site.
Not a single person including Ben has provided information on how the stock market is handling this news.
Let us know the last day when the US airline industry except for one airline saw high single digit or low double digit gains on the stock market.
The US airline is almost entirely publicly...
your fixation w/ me to the exclusion of dealing w/ the facts IS the problem w/ airline social media, including this site.
Not a single person including Ben has provided information on how the stock market is handling this news.
Let us know the last day when the US airline industry except for one airline saw high single digit or low double digit gains on the stock market.
The US airline is almost entirely publicly traded which means it is not hard to figure out how the actual owners of the airline industry think about this news.
You contribute nothing.
Walk away.
I think things have just changed like you say to an extent over the past five years. Between higher labor costs and changing customer preferences/behaviors, it is just difficult for ULCCs unless they stick to very specific/underserved niches that they have identified ala Sun Country and Allegiant (both of which generally do NOT try to go where other airlines already are), and only chase further growth in a disciplined way- if and when they find...
I think things have just changed like you say to an extent over the past five years. Between higher labor costs and changing customer preferences/behaviors, it is just difficult for ULCCs unless they stick to very specific/underserved niches that they have identified ala Sun Country and Allegiant (both of which generally do NOT try to go where other airlines already are), and only chase further growth in a disciplined way- if and when they find opportunities that have a strong likelihood of success or at least a very low entry cost to try them.
Literally everyone except Robin Hayes and the former JetBlue management could see that buying Spirit was going to be a poisoned chalice- the costs would be far too high to swallow and would not in any way have addressed JetBlue's litany of other problems that the current management team finally seems to be focused on doing something about (operations).
JetBlue was never going to improve its competitive and financial positions until it did try to fix those fundamental problems such as hemorrhaging money by continuing to operate its LAX hub, and poor operations at its JFK and BOS hubs which are its home base.
A lot of the comments and thoughts around consolidation revolve around the idea that there is too much capacity in the US, and airfares are too low given the cost structures. The issue is that there is too much employment (airport, airline, hotel, restaurant, theme park, cruise line, etc) tied up in the idea of widely available and affordable air travel. Politicians, judges and regulators will be highly incentivized to keep these planes in the...
A lot of the comments and thoughts around consolidation revolve around the idea that there is too much capacity in the US, and airfares are too low given the cost structures. The issue is that there is too much employment (airport, airline, hotel, restaurant, theme park, cruise line, etc) tied up in the idea of widely available and affordable air travel. Politicians, judges and regulators will be highly incentivized to keep these planes in the air and these routes flying. Spirit may go away, but some other low fare carrier (whether it exists today or is formed) will take its place and offer the schedule and routes to Florida, Vegas, wherever. Politicians are not just going to let Delta and United drive other airlines out of business and then raise fares 50%.
I agree that we will likely have direct or indirect subsidies to ensure that there is some kind of low-fare airline competition into the future, because the alternative will likely be the Postal Service/Amtrak model where because the private sector will inevitably stop doing anything that isn't sufficiently profitable (and preferably growing in profit) for investors, we will end up having to massively expand EAS to maintain national/regional connectivity.
Anthony is correct other than that more carriers will come in to replace failed carriers; the barriers to entry - both for labor costs and aircraft - are high. It is actually Airbus and Boeing's inability to deliver aircraft - and partly their other suppliers - that keep airplane supply tight which means few cheap airplanes.
Pilot supplies are still relatively tight - at least air carrier ready pilots.
The US has subsidized lower...
Anthony is correct other than that more carriers will come in to replace failed carriers; the barriers to entry - both for labor costs and aircraft - are high. It is actually Airbus and Boeing's inability to deliver aircraft - and partly their other suppliers - that keep airplane supply tight which means few cheap airplanes.
Pilot supplies are still relatively tight - at least air carrier ready pilots.
The US has subsidized lower cost carriers by giving them better access to key airports than any other carrier has done.
and the issue w/ subsidies is that it keep carriers like AA alive and they are the biggest drain on industry profitability.
Please name the subsidies that are keeping AA and any other carrier afloat tim.
you do realize that AA as well as most of the industry has access to taxpayer developed assets that provide a means to charge higher fares? these include airport terminals and slots at slot controlled airports.
If the airline industry was really completely free market, then carriers could not hide behind strength hubs to prop up the rest of their business that clearly does not make money.
AA has talked frequently that DCA, CLT and...
you do realize that AA as well as most of the industry has access to taxpayer developed assets that provide a means to charge higher fares? these include airport terminals and slots at slot controlled airports.
If the airline industry was really completely free market, then carriers could not hide behind strength hubs to prop up the rest of their business that clearly does not make money.
AA has talked frequently that DCA, CLT and DFW are its big profit centers and all of those are airports and metros where other competitors cannot add service enough to displace AA's strength.
Other carriers including DL and UA have strength hubs but generate higher margins in the process.
Wait. Are you talking about the government-funded assets like restricting airports near ATL, MSP, DTW, and SLC that keep delta monopoly hubs that, per Delta, generate most delta profits?
Or are you talking about the slots at JFK and LGA that keep competition away from Delta?
Or are you talking about the LAX gates delta has that restrict entry to the market?
Sorry. Which ones are unique to AA? Delta has colluded with...
Wait. Are you talking about the government-funded assets like restricting airports near ATL, MSP, DTW, and SLC that keep delta monopoly hubs that, per Delta, generate most delta profits?
Or are you talking about the slots at JFK and LGA that keep competition away from Delta?
Or are you talking about the LAX gates delta has that restrict entry to the market?
Sorry. Which ones are unique to AA? Delta has colluded with the city of Atlanta and the state of Georgia to prevent far more competition than your weird view of slot allocation that has benefited Delta immensely.
And DCA, CLT, and DFW all have nearby airports that compete with them. In DFW's case, there's a new airport being built today. That's different than Delta colluding with the city to acquire nearby airports to prevent competition with ATL, in particular. A VERY well-documented collusion between the city and Delta.
Find some new talking points, buddy. Delta, per their own investor reports, owes its profits to their monopoly hubs where Delta actively works to prevent competition.
I guess the autopen was broken the day the merger came up for approval.
There's something wrong with the competitive/regulatory landscape in the U.S. if an airline's only chance for survival is being gigantic and making most of its profit off non-flying revenue. It's a recipe for price fixing and poor customer experience. I understand the argument that it's hard to survive as an airline without economies of scale, but the more consolidation there is, the fewer choices consumers have.
Do you have an alternative? Regulation made airfare extremely expensive. In adjusted dollars, you'd need $2000 to fly roundtrip to the west coast. I'd rather Spirit go out of business than have to pay two grand to get to California
If the Spirits and JetBlues go out of business, Delta and United will start charging $1,000 each way in economy to fly transcon from JFK to LAX. Right now, you can fly economy on those airlines or sub $200 depending on the timing.
Not that JetBlue is in a better spot, but could they revisit that merger?
first, the notion that antitrust policy changes significantly from administration to administration is counter to actual history. The US has had fairly consistent antitrust policy for airlines for decades. And states have the right to sue even if the DOJ allows mergers and asset transfers.
second, B6 is the one that jumped into the F9/NK merger and forced NK's shareholders to consider B6' richer offer which ultimately failed because the DOJ was against B6' stated...
first, the notion that antitrust policy changes significantly from administration to administration is counter to actual history. The US has had fairly consistent antitrust policy for airlines for decades. And states have the right to sue even if the DOJ allows mergers and asset transfers.
second, B6 is the one that jumped into the F9/NK merger and forced NK's shareholders to consider B6' richer offer which ultimately failed because the DOJ was against B6' stated plans to convert all of NK's planes to B6' less dense seating configuration which would have meant fewer discount seats and the loss of a ULCC carrier.
and third, B6 doesn't have the financial strength now to engage in a merger.
F9 might try to merge w/ NK again but the chances are that NK will just shut down and the pieces will be picked up; and while people think that NK has a bunch of assets that US carriers will scramble for, most of their fleet like ULCC is leased and airplanes can and will be redeployed throughout the world.
This is indeed a troubling update. I think it would be interesting to know the % of the network (both the # of routes and the % of ASMs) that was competing 'head-to-head' with network carriers at a given point in time (say July 31) for each of the past five years. It would then be interesting to compare that with Frontier, and then measure the churn of these routes at each carrier (how many...
This is indeed a troubling update. I think it would be interesting to know the % of the network (both the # of routes and the % of ASMs) that was competing 'head-to-head' with network carriers at a given point in time (say July 31) for each of the past five years. It would then be interesting to compare that with Frontier, and then measure the churn of these routes at each carrier (how many routes failed and how many new routes were started). Just as an FYI, I think the link regarding the dire financial situation tracks to the Q1 filing signed on May 30, 2025 and not the most recent filing yesterday.
Many of the staff at the Trump (Eastern Airlines) Shuttle managed to stay flying with successive mergers once this Eastern Shuttle Asset was acquired.
Spirits Pilots and Flight Attendants Unions need to rapidly come up with contract language to encourage domicile staffing assets and employee pools go with their planes domiciles should the worst happen and pieces of the Spirit puzzle are divested.
in other words, a plan not necessarily in total seniority order in...
Many of the staff at the Trump (Eastern Airlines) Shuttle managed to stay flying with successive mergers once this Eastern Shuttle Asset was acquired.
Spirits Pilots and Flight Attendants Unions need to rapidly come up with contract language to encourage domicile staffing assets and employee pools go with their planes domiciles should the worst happen and pieces of the Spirit puzzle are divested.
in other words, a plan not necessarily in total seniority order in which a pool of base specific staff are willing to go with planes, in base or out of base staff willing to be on a list to go with planes. Seniority based staffing choice by asset base. Etc.
Therefore if there are asset shifts Spirit would not be responsible for any base relocations or downsizings because this option was available and others could make the best decisions for themselves and continue working without forced base relocations due to the companies going concern, and asset redistribution.
There's a good theory to keeping Spirit independent as it forces other airlines to offer a cheaper Basic Economy product, which is good for consumer welfare. Would have not served that role had its assets been absorbed into B6, although that might have served another good (helping to prop up a fourth nationally-competitive full-service airline).
Problem is, it looks like a large Basic Economy-only airline might be economically unsustainable in a post-Covid world in the...
There's a good theory to keeping Spirit independent as it forces other airlines to offer a cheaper Basic Economy product, which is good for consumer welfare. Would have not served that role had its assets been absorbed into B6, although that might have served another good (helping to prop up a fourth nationally-competitive full-service airline).
Problem is, it looks like a large Basic Economy-only airline might be economically unsustainable in a post-Covid world in the US, given high labor costs and consumer preference for a better product. Maybe that'll change if the economy continues to deteriorate, on both the consumer preferences front and the labor front.
US airlines cannot compete on cost any more. Delta led the industry in raising labor rates post covid - and I am certain that they did so knowing it would squeeze some lower cost competitors. It is against antitrust regulations for a larger competitor to cut costs to eliminate a lower cost competitor but it has not been ruled illegal to raise costs to eliminate lower cost competitors.
DL also led the industry in having...
US airlines cannot compete on cost any more. Delta led the industry in raising labor rates post covid - and I am certain that they did so knowing it would squeeze some lower cost competitors. It is against antitrust regulations for a larger competitor to cut costs to eliminate a lower cost competitor but it has not been ruled illegal to raise costs to eliminate lower cost competitors.
DL also led the industry in having basic economy fares pre-covid. The big 4 including WN are far larger than any ULCC or LCC other than WN.
Despite what UA wants to say, DL has led the industry in adding economy seats; even though UA is adding domestic capacity at a faster rate, DL's domestic system is much larger. AA and WN's lower profitability does not give them the financial room to add capacity so it is DL and UA that are squeezing lower cost competitors.
When you combine higher costs and the ability to match the lowest fare with better service, it is hard to believe that the ultra low cost segment of the industry will work. and there will be low cost carriers that will not be able to remain as viable airlines.
Cool
I have a flight on NK next week one way IAH EWR. I paid 4,000 pts plus $45. I also have a bid to a big front seat pending for $88. My boxing record with Spirit is 10-0 with 0 KOs as I’ve yet to encounter a fight onboard.
the reason why NK is in so much financial trouble is because US taxpayers heavily subsidized the US airline industry during covid. Nearly every black swan event has resulted in failure of an airline or two in the US but starting w/ 9/11, the answer has been to throw billions of dollars at the US airline industry.
DL and WN are the only two airlines that would have survived covid w/o federal taxpayer help; both...
the reason why NK is in so much financial trouble is because US taxpayers heavily subsidized the US airline industry during covid. Nearly every black swan event has resulted in failure of an airline or two in the US but starting w/ 9/11, the answer has been to throw billions of dollars at the US airline industry.
DL and WN are the only two airlines that would have survived covid w/o federal taxpayer help; both had billions of dollars in lines of credit that they were able to pull down as soon as the banking system began to function again - it froze up for all companies immediately after the country was disastrously locked down.
there needed to be a thinning of the herd among airlines and that still needs to happen.
NK/B6 wouldn't have helped at all other than to take down B6 even faster. There is no justification for anti-consumer activity by taking two airlines down in order to save one.
Frontier isn't much better than NK financially.
B6 might be more valuable in a merger or acquisition but it is funding its operations with debt and is not near as attractive as people want to believe.
and AA is the biggest drain on the US airline industry; it has been barely profitable for over a decade and pumps tens of millions of money-losing seats into the market every year.
There needs to be a thinning of the herd and it is likely to start w/ the ULCC sector and then keep working its way "up the hierarchy" of the industry.
WN is repositioning itself to be in the successful legacy camp. The chances are high that the US industry in 5 years - if the government could refrain from dumping money into it, black swan or not - could be just AS, DL, UA and WN
"DL and WN are the only two airlines that would have survived covid w/o federal taxpayer help;"
Negative revenue in April of 2020 (per Ed bastian, Delta was losing $60M/day). Delta was an active participant begging the federal government for bailout money in 2020 to survive. Bastian quotes on the topic are easy to google, Tim. There was no reticence from Delta about begging for federal bailout money to survive, only from you 5 years...
"DL and WN are the only two airlines that would have survived covid w/o federal taxpayer help;"
Negative revenue in April of 2020 (per Ed bastian, Delta was losing $60M/day). Delta was an active participant begging the federal government for bailout money in 2020 to survive. Bastian quotes on the topic are easy to google, Tim. There was no reticence from Delta about begging for federal bailout money to survive, only from you 5 years later to fit a narrative in your head. Let's not make up new facts to fit your internal mental narrative. You have absolutely no proof or idea if Delta would've made it through the pandemic without federal aid but we do know Delta leveraged their mileage plan to raise money. We know Delta begged the feds for the first bailout, in particular, and was more than happy to take the billions from the next two. Any chance of survival Delta had without bailout money involved furloughing their entire workforce immediately, mothballing aircraft and then you assume off that Delta could magically reappear and fly again. Sorry pal, rewriting history is not your strong suit.
"and AA is the biggest drain on the US airline industry; it has been barely profitable for over a decade""
barely profitable Since Covid? Yes. Over more than the last decade? no. You claim to write financial reports? That's obviously hardly true. AA was making billions per year pre-covid. Was it Delta amounts? no. but it was hardly "barely profitable".
"and AA... pumps tens of millions of money-losing seats into the market every year."
Let's be clear. Delta loses the most money, by far, on a pure PRASM vs CASm look at the industry -- aka. Delta pumps tens of millions of the most money-losing seats into the market every year. United loses the least money on PRASM vs CASM. AA, Delta, and UA all pump millions of money-losing seats into the market every year and Delta is the worst offender. However, Delta has the most profitable mileage plan and credit card deal. If you're going to make your usual idiotic arguments, at least try to be dogmatic with some degree of data.
all that keyboard banging and you miss the real points.
ALL airlines were burning through huge amounts of cash because customers were refunding trips they would not fly because of the lockdown.
Yes, DL was burning cash and was losing money.
Doesn't change that DL and WN both had access to billions of dollars in lines of credit which other airlines did not have.
and federal aid did not stop w/ the immediate post covid...
all that keyboard banging and you miss the real points.
ALL airlines were burning through huge amounts of cash because customers were refunding trips they would not fly because of the lockdown.
Yes, DL was burning cash and was losing money.
Doesn't change that DL and WN both had access to billions of dollars in lines of credit which other airlines did not have.
and federal aid did not stop w/ the immediate post covid stabilization of the industry.
AA has had the lowest net profit margin in the US airline industry for over a decade.
and, you love to cherrypick and your statement about PRASM proves it. DL is composed of ALL sources of revenue and costs. DL leads the GLOBAL industry in revenues and the US industry in profits.
picking out PRASM is yet another sore attempt in admitting that DL figured out long ago what it takes to survive and thrive
"all that keyboard banging and you miss the real points."
No. You just flat out lied and I quoted you verbatim and responded with actual information, not random sh*t I made up in my head, like you. You've said multiple times that Delta would've survived the pandemic without bailout money which is just a flat out lie and it doesn't even take much of a google search to find out Delta's CEO was pleading...
"all that keyboard banging and you miss the real points."
No. You just flat out lied and I quoted you verbatim and responded with actual information, not random sh*t I made up in my head, like you. You've said multiple times that Delta would've survived the pandemic without bailout money which is just a flat out lie and it doesn't even take much of a google search to find out Delta's CEO was pleading with Congress for federal money to survive.
"AA has had the lowest net profit margin in the US airline industry for over a decade."
no. they were not. United took the lead on that "first place" for a number of of years pre-covid.
Try just stop typing if you're going to make things up like this.
no, you cherrypicked part of the revenue of a company and act like it is the metric that matters.
DL, just like every other airline, gets revenue from more than just passenger ticket sales.
It is beyond hypocritical to compared PRASM vs. CASM when all of the big 4 don't make money - but you and others simply focus on DL when in reality they have done the best job of diversifying their revenue...
no, you cherrypicked part of the revenue of a company and act like it is the metric that matters.
DL, just like every other airline, gets revenue from more than just passenger ticket sales.
It is beyond hypocritical to compared PRASM vs. CASM when all of the big 4 don't make money - but you and others simply focus on DL when in reality they have done the best job of diversifying their revenue sources but still support one of the best-paid workforces in the global airline industry.
Nobody is confused by YOUR bias and cherrypicking, Max. well, except you.
and, Max, the last decade includes the last 4 years in which UA has handedly outperformed AA in profits.
again, don't cherrypick data which anyone w/ a modicum of intelligence knows is not reflective of reality.
Tim's post is the most [citation needed] post ever seen on OMAAT.
The merger was not approved because it would have been anti-competitive. So now Spirit goes away, giving more power to JetBlue and Frontier. Presumably they raise prices where they can. Isn't that the opposite of what the government wanted by denying the merger?
Yeah, modern governments have a poor record - so relying on to do the right thing is a risk.
If Spirit goes under, how will the Ratcheteers travel to their Carnival cruises?
Take Frontier instead with an 18 hr layover in BWI.
Racist
@Travelwithdavid
@Teejay right ?
The activist shareholders who opposed the original Frontier-Spirit merger will finally get what they deserve. Nothing.
Hopefully this airline and Frontier go bust and go away. And maybe, although I won't count on it, legacies will then go back and improve the coach product, including seating made for adult humans. That will mean the end of $39 fares, which was a moronic idea to begin with. Can you imagine if your grocery store sold groceries at 1985 price levels and hope to make up the loss on each transaction on higher volume?
Not every seat is sold for $39.00 #rollseyes
Ben, I respectfully disagree that a merger would have helped.
First let's assume your base assumption is true (I think it's debatable but let's assume it's true): people's travel habits have changed to where the ULCC model is no longer viable. Thus whatever airline emerges through merger or bankruptcy must be a new model that better serves customers' new preferences. Also, let's assume that regardless, Spirit will not survive as an independent entity. It...
Ben, I respectfully disagree that a merger would have helped.
First let's assume your base assumption is true (I think it's debatable but let's assume it's true): people's travel habits have changed to where the ULCC model is no longer viable. Thus whatever airline emerges through merger or bankruptcy must be a new model that better serves customers' new preferences. Also, let's assume that regardless, Spirit will not survive as an independent entity. It will disappear or merge.
Your argument is that allowing JetBlue and Spirit to merge would have been a better way of birthing that new airline, than allowing Spirit to go bust and other airlines picking up the pieces through in a bankruptcy proceeding. I disagree.
First, JetBlue is not a healthy airline. I frankly have no idea why they pursued this merger in the first place aside from desperation. There are no synergies like a strong loyalty program, or geographic distribution. Paying out Spirit's shareholders in a merger would have left JetBlue so financially weakened that they likely would go BK if the merger went through. Then we're out 2 airlines instead of 1.
In contrast, if Spirit goes BK the primary loss is to Spirit's shareholders, who are taking that risk by continuing to hold their stock. Whatever assets JetBlue might have acquired in a merger, eg aircraft and routes, they're free to acquire post-bk.
Furthermore, while aircraft will probably simple go to the highest bidder, routes need to be approved by the government. That is, United (for example) can't just walk in and bid up routes to box out competition. Each route slot can and should be evaluated as to which airline it should be awarded to based on promoting competition and not just highest bid. JetBlue may get some of those routes, and other airlines may get others.
The bottomline is that a BK actually gives the government *more* flexibility in structuring Spirit's assets to promote competition, than a simple merger. If JetBlue bids for most of the routes and it makes competitive sense to give them to JetBlue, then the government is free to do so, regardless of if someone else bids higher but would long-term lead to less competition. Or if it makes sense to distribute routes across different airlines, they can do so. This is a far better outcome for the public than a merger. Plus it doesn't burden the winning airlines with massive debt to payout Spirit shareholders. That will ultimately lead to stronger airlines too. The only loser is Spirit shareholders, who don't need any bailout since they've long been aware of Spirit's financials.
Did you write this comment in 1977? You understand the Airline Deregulation Act means airlines don't bid on "route slots," whatever the hell that is supposed to mean. Any airline is free to launch any domestic route it would like and does not require the government to award a bid. Additionally, Spirit is no longer a publicly traded company, so its debt is privately held. Shareholders were already wiped out. Your entire last paragraph is...
Did you write this comment in 1977? You understand the Airline Deregulation Act means airlines don't bid on "route slots," whatever the hell that is supposed to mean. Any airline is free to launch any domestic route it would like and does not require the government to award a bid. Additionally, Spirit is no longer a publicly traded company, so its debt is privately held. Shareholders were already wiped out. Your entire last paragraph is complete nonsense, and I can't even guess where you got that information from.
Bids for routes? What route authority of any value does Spirit hold? They serve a handful of international routes that any other US carrier could start with minimal effort.
Yes, Spirit does have minimal slot and gate holdings at desirable congested airports that have some value.
There will be a Netflix documentary about this soon. How an airline was the most profitable in the industry to a rapid decline and then bankruptcy. It's funny what an entitled and lazy workforce can do to companies and industries as a whole. Higher wages, higher insurance costs, increased benefits and still you get a below average effort workforce. Spirit would have had a better chance at survival if they had a decent credit caFinancials.
...There will be a Netflix documentary about this soon. How an airline was the most profitable in the industry to a rapid decline and then bankruptcy. It's funny what an entitled and lazy workforce can do to companies and industries as a whole. Higher wages, higher insurance costs, increased benefits and still you get a below average effort workforce. Spirit would have had a better chance at survival if they had a decent credit caFinancials.
Alas, the big 3 live on with AA being the next one that will begin to have very questionable financials. Oh wait.....
Who cares????
I do! But thanks for your input.
Just put them out of their misery already. Take them off life support. Same goes with Avelo.
Remember that there was an alternate merger around that likely had a better shot of being approved - Frontier and Spirit. The Spirit CEO really wanted the Frontier deal, but activist shareholders screwed it up.
If I recall correctly, the judge specifically called out the loss of a low cost carrier as a rationale for blocking the JetBlue deal. JetBlue's argument was kind of convoluted - we need these assets to better compete with...
Remember that there was an alternate merger around that likely had a better shot of being approved - Frontier and Spirit. The Spirit CEO really wanted the Frontier deal, but activist shareholders screwed it up.
If I recall correctly, the judge specifically called out the loss of a low cost carrier as a rationale for blocking the JetBlue deal. JetBlue's argument was kind of convoluted - we need these assets to better compete with the majors, even if we are going to raise prices. Frontier's argument was "bringing lower fares to more people," which is must more straightforward. If Spirit does eventually go bankrupt, one way or the other (liquidation or whole company sale), Frontier will likely end up with most of the assets.
@ Anthony -- While I think JetBlue was going to overpay in the deal, I don't think JetBlue's argument was convoluted. You need scale to be profitable in the US airline industry, since the ability to profit off a loyalty program requires being a larger carrier.
As far as Frontier taking over Spirit assets... to what end? Frontier's lack of profitability isn't because it's not big enough, but instead, because of its lack of pricing...
@ Anthony -- While I think JetBlue was going to overpay in the deal, I don't think JetBlue's argument was convoluted. You need scale to be profitable in the US airline industry, since the ability to profit off a loyalty program requires being a larger carrier.
As far as Frontier taking over Spirit assets... to what end? Frontier's lack of profitability isn't because it's not big enough, but instead, because of its lack of pricing power, due to the "big three" US carriers keeping everyone else down.
Ben, with respect old bean, you appear to be falling into the points and loyalty program pit. Your argument is not holding up to real scrutiny.
Sorry, but you’re absolutely wrong about criticizing the regulators blocking the merger. Mergers NEVER benefit the consumer, and are almost always anti competitive. If spirit can’t operate without being acquired then, so long and good bye. Some companies should be allowed to fail. I feel bad for the employees of course, but a merger would have resulted in the same effect as going out of business; Higher fares and monopolistic pricing. The whole line about...
Sorry, but you’re absolutely wrong about criticizing the regulators blocking the merger. Mergers NEVER benefit the consumer, and are almost always anti competitive. If spirit can’t operate without being acquired then, so long and good bye. Some companies should be allowed to fail. I feel bad for the employees of course, but a merger would have resulted in the same effect as going out of business; Higher fares and monopolistic pricing. The whole line about “being stronger to challenge the big. 4” is BULL. The mergers are designed to jack up pricing and eliminate competition.
I’ll never understand why the Airline industry hates competition more than other industries and longs for monopolistic power. Passengers are already treated like dirt with the few carriers we have. If airlines are going to consolidate into duopoly’s or monopolies- might as well re-regulate the airlines. At least under government control they’re theoretically held to answer by the People via elected representatives, not greedy sleazy stockholders.
@ Brian -- I'm sorry, I strongly disagree with this take. Higher fares and monopolistic pricing? You understand that even the most profitable airlines in the US are essentially losing money actually flying passengers, and make money on everything else? At profitable airlines, loyalty programs are subsidizing our ticket prices. At unprofitable airlines, shareholders are subsidizing our ticket prices.
Fares are *way* lower than they were under regulation, so to suggest that we might as...
@ Brian -- I'm sorry, I strongly disagree with this take. Higher fares and monopolistic pricing? You understand that even the most profitable airlines in the US are essentially losing money actually flying passengers, and make money on everything else? At profitable airlines, loyalty programs are subsidizing our ticket prices. At unprofitable airlines, shareholders are subsidizing our ticket prices.
Fares are *way* lower than they were under regulation, so to suggest that we might as well just go back to that era seems a bit extreme...
Ben, one has to take exception to some of what you post in response to Brian’s view point.
You are one of the biggest critics of the U.S. airlines. In the event that U.S. airlines are loosing money by “Flying passengers”, then surely they should look to their flying customers concerns, train their staff to offer customers a better inflight experience. Furthermore, become more efficient in flight time management and learn from their basic...
Ben, one has to take exception to some of what you post in response to Brian’s view point.
You are one of the biggest critics of the U.S. airlines. In the event that U.S. airlines are loosing money by “Flying passengers”, then surely they should look to their flying customers concerns, train their staff to offer customers a better inflight experience. Furthermore, become more efficient in flight time management and learn from their basic mistakes of relying upon points and loyalty programs for their revenue.
Get the basics right and the rest will follow. Continue on their downwards spiral to the bottom of the World Rankings, without change and follow Spirt out through the door.
I paid PanAm $1000 for a one-way ticket to Delhi form JFK, in 1988. Today, the same ticket costs $450. The fear that airlines have (or about to have) monopolistic pricing power is absolutely unfounded.
While I agree with statement that mergers are "almost always anticompetitive", I stress the word "almost" there. Airlines run on razor thin margins and they do need a bit more leeway in pricing, at least for now.
@VS
I agree that for international travel there isn't necessarily monopolistic pricing power, but that's because there's a lot more competition and a one-stop itinerary on a long-haul doesn't affect overall travel time nearly as much as a one-stop on a domestic flight. In addition, domestic US airlines essentially have geographic monopolies in many places, where they offer more frequencies and more direct flights than any of their competitors possibly could, and as a...
@VS
I agree that for international travel there isn't necessarily monopolistic pricing power, but that's because there's a lot more competition and a one-stop itinerary on a long-haul doesn't affect overall travel time nearly as much as a one-stop on a domestic flight. In addition, domestic US airlines essentially have geographic monopolies in many places, where they offer more frequencies and more direct flights than any of their competitors possibly could, and as a result can charge a premium for that convenience.
Case in point, I experienced this earlier this year going ATL-SLC for a ski trip. Delta was over $800 RT, Southwest was $400 but with a connection each way. I opted to fly out early on SW, get a hotel in downtown SLC to wait for the rest of my group, and still spent less money than I would have on the direct Delta flight, but my total itinerary was twice the time that the Delta flight would have been.
You say that mergers never benefit the consumer, but the alternative here is Spirit going out of business and the 195 planes worth of capacity being removed from the market. That's going to make prices go up. If JetBlue got those planes those seats would still be online providing additional supply and driving prices down.
Good news for Greyhound.
This unfortunate countdown seems to have been a long time coming. Basic Economy was the starting gun.
BobS says, "This unfortunate countdown seems to have been a long time coming. Basic Economy was the starting gun."
Agreed. Basic economy, no change fees and far better management of the big three legacy airlines along with higher post-Covid costs have dramatically changed the playing field.
Today is known as “The Glorious Twelfth” in “God’s County”.
The Glorious Twelfth, that is the twelfth day of August, is the start of the Red Grouse shooting season.
God’s County, that is County of Yorkshire, with the real York at its centre.
Ok! I hear you ask, so, what has the Glorious Twelfth got to do with aviation and this website? The Glorious Twelfth has absolutely nothing to do with aviation, however, it...
Today is known as “The Glorious Twelfth” in “God’s County”.
The Glorious Twelfth, that is the twelfth day of August, is the start of the Red Grouse shooting season.
God’s County, that is County of Yorkshire, with the real York at its centre.
Ok! I hear you ask, so, what has the Glorious Twelfth got to do with aviation and this website? The Glorious Twelfth has absolutely nothing to do with aviation, however, it does have as much to do with this website as 90% of all the other irrelevant posts to be found herein.
Ben, your website is now being used by a few fake trolls who are making a mockery out of you, your business enterprise and this website. Your security measures are weaker than the Iranian rial, the weakest currency in the world. There is nothing to stop the John Doe’s of this planet from posting under any login name they choose. Impersonating any other legitimate person causing a nuisance to many Profanities are tolerated without a murmur, as is antisemitism, racism, bullying and homophobia too.
Ben, many people looked to this website for inspiration, help and advice on a variety of aviation topics. Not anymore however, many of the long term followers have deserted you. Driven away by the mindless morons who are allowed to post herein unchecked.
Those same numpties will now be free to castigate me for standing in front of them holding this mirror of truth. You are unlikely to take the necessary remedial action necessary to prevent the patients from taking over this lunatic asylum. Your future and that of your family is at risk if only you could grasp that fact Ben.
"Those same numpties will now be free to castigate me for standing in front of them holding this mirror of truth. "
7 paragraphs to start off the day about "trolls" from a troll himself that complains about "anonymous logins" yet routinely is a guest poster mirroring Tim Dunn's weird talking points about being the only holder of truth.
ok, Tim.
As soon as the Jet Blue deal was blocked, a sale of Spirit assets (in whole or piecemeal) was inevitable.