Spirit Airlines collapse sparks fears for future of cheap flights and budget carriers

Days after Spirit Airlines ceased operations overnight, a lawyer representing the now-defunct budget carrier appeared before a bankruptcy judge, offering an apology to the throngs of price-conscious customers who may now struggle to find affordable flights.

"We apologize most specifically for those Americans who may now be priced entirely out," Spirit lawyer Marshall Huebner stated in court, extending gratitude to passengers who relied on the airline during its 34-year tenure.

Many of these travelers, he noted, "could not otherwise have afforded air travel."

Spirit’s May 3 collapse is not the sole challenge facing travelers just a week before the traditional Memorial Day launch of the U.S. summer travel season. Soaring jet fuel costs, exacerbated by the Iran war, have driven up airfares and associated fees across the commercial aviation industry. Furthermore, two of the remaining U.S. budget carriers recently finalized a significant merger.

The precarious future of economical air travel underscores the increasing difficulty for low-cost, no-frills airlines to operate. These carriers are caught between volatile fuel prices, persistent inflation and intensifying competition.

While budget airlines primarily attract customers motivated by fare prices alone, traditional carriers possess more avenues to generate revenue, such as premium cabins, membership rewards, corporate travel programs, add-on charges, and sophisticated pricing algorithms, which help offset rising fuel costs.

"Dynamic pricing has taken away one of the last structural advantages that low-cost carriers had," observed Shye Gilad, a former airline captain who now teaches at Georgetown University.

For decades, low-cost carriers flourished by offering fares that traditional airlines often couldn’t match without incurring losses. However, that competitive edge has diminished as the "big three"—American, Delta, and United—became more adept at tailoring prices to diverse travelers. Simultaneously, airlines like JetBlue and Southwest, which once positioned themselves as less expensive alternatives, began pursuing higher-paying customers.

Today, major airlines can sell a limited number of basic seats at prices comparable to Spirit’s, while still commanding higher fares for standard and premium tickets elsewhere on their aircraft. This strategy has made it increasingly difficult for budget airlines to compete solely on price.

"They can’t just be the cheapest airline anymore," Gilad asserted. "They have to be the smartest low-cost airline."

Mirroring the trends in gasoline and diesel prices, the cost of jet fuel has surged since the Iran war began impacting Middle East oil shipments 11 weeks ago. This financial strain prompted the Association of Value Airlines, a U.S. trade group representing Allegiant Air, Avelo Air, Frontier Airlines, Spirit Airlines, and Sun Country Airlines, to request $2.5 billion in temporary financial aid from the Trump administration in late April.

Airlines for America, the trade group for Alaska Airlines, American, Delta, JetBlue, and Southwest, opposed the proposal. They argued that federal assistance would grant budget airlines an unfair advantage.

"Government intervention on behalf of those airlines would punish other airlines that have engaged in self-help in order to deal with increased costs and reward airlines who haven’t made those tough decisions," Airlines for America stated. "And, in the long-term, sustaining businesses that cannot earn their cost of capital harms competition and consumers by making it more difficult for other airlines to compete."

Transportation Secretary Sean Duffy rejected the request on the very day Spirit ceased flying.

Even prior to the latest escalation in fuel costs, consolidation was already afoot within the budget airline sector. Alaska Airlines completed its $1 billion acquisition of Hawaiian Airlines in September 2024, following an agreement between the two carriers to maintain service levels on key routes within Hawaii and between Hawaii and the U.S. mainland where competition was minimal.

Spirit itself was an unsuccessful merger target for both Frontier and JetBlue as its losses mounted in the wake of the coronavirus pandemic.

Last week, Allegiant announced it had finalized its approximately $1.5 billion acquisition of Sun Country, a deal initially announced in January. The combined entity merges passenger service with Sun Country’s cargo operations and its charter business, which serves sports teams, casinos, and the U.S. Department of Defense.

"Consolidation is a signal" of weakness in the industry, Gilad commented. "If you can remove a competitor and improve your product offering, you might be able to eke out more profit."

Other experts highlight the inherent diversity within the budget airline sector, a factor that could render some carriers more resilient to spiking fuel costs and market disruptions than others.

"Budget airlines are a pretty peculiar creature," said Vikrant Vaze, an aviation systems expert at Dartmouth College’s engineering school. He described a category that has encompassed struggling carriers like Spirit to giants such as Southwest Airlines, which evolved from a low-cost pioneer into one of the largest U.S. airlines.

"Even though they can be clubbed together as budget airlines, if you want a big umbrella term, they’re very different from each other," Vaze explained. "They have very different levels of budget-ness."

Allegiant, for instance, focuses on leisure travel to smaller airports with less direct competition. JetBlue, a hybrid low-cost carrier, leans more heavily on premium seating and loyalty perks than Spirit ever did.

Frontier most closely mirrors Spirit’s model as an ultra-low-cost carrier, though analysts suggest it entered this period of volatility with stronger liquidity and stands to benefit from Spirit’s departure. It has already begun expanding into former Spirit-heavy markets, including Las Vegas, Detroit, and the Florida cities of Orlando and Fort Lauderdale.

Gilad sees parallels with his own experience as a pilot and flight-training instructor at Independence Air, a short-lived low-cost airline that previously served as a regional carrier for United and Delta. That airline, launched in mid-2004 as fighting between U.S.-led forces and insurgents in Iraq sent fuel prices soaring, ultimately shut down during bankruptcy proceedings in January 2006.

"They burned through almost $200 million in 18 months," Gilad recalled. "It was just that quick that they were gone."

He noted that the same structural pressures persist today, but with fewer budget airlines remaining to absorb them.