Problems keep piling up for budget airlines like Spirit Airlines — so get set to pay more

• Spirit Airlines is considering filing for bankruptcy protection, The Wall Street Journal reported.
• Its struggles are indicative of the wider issues faced by budget airlines as labor and fuel costs rise.

In another sign of the problems faced by budget airlines, The Wall Street Journal reported that Spirit Airlines is considering filing for bankruptcy protection.

Falling profits for the cheapest carriers could result in higher ticket prices and fees for passengers as airlines try to cope with increased fuel and labor costs.

The introduction of premium-seating options and axing routes is spelling the end of budget airlines as we've known them.

Declining revenues saw Spirit post a net loss of $192 million in the second quarter. Its struggles intensified after a planned merger with JetBlue was called off in March.

The airline's stock was down about 25% on Friday, leaving it worth less than $200 million.

When asked for comment on the Journal's report, Spirit referred to CEO Ted Christie's words on an August earnings call. He said the airline was engaged in "productive" conversations with its bondholders' advisors.

Filing for Chapter 11 bankruptcy would let Spirit restructure its assets. The ultra-low-cost carrier has already tried several methods to try to stop the bleeding, like introducing premium-seating options and cutting routes.

According to data from Cirium, Spirit reduced the number of seats scheduled to be flown by 18% between August and September. This month, its schedule is a tenth smaller than last October.

Neil Glynn, of research and analysis firm AIR Control Tower, said in a report Friday that these developments highlight the challenges facing the leanest airline business models following a surge in costs across the industry.

Glynn also highlighted that increasing labor costs have "not been absorbable by the quality of its network."

Fewer routes could see passengers face higher ticket prices on other airlines due to reduced competition.

Higher prices, fewer routes, and no hot meals

Budget airlines could raise their prices, especially since they lack the business- and first-class cabins that are highly profitable for mainline carriers.

Airlines like Spirit rely on filling as many seats as possible and keeping their planes flying as much as possible to compensate for cheap tickets.

Ancillary revenue, from add-ons like baggage fees or inflight drinks, is also a mainstay. However, Spirit warned in July that it was making less than expected from this revenue stream.

Many other budget carriers have been shaking up their operations as they contend with reduced profits, which has raised questions about the nature of their business models.

In February Frontier Airlines announced a new "BizFare" package with perks including priority boarding, a free carry-on, and premium seat assignments. Its pre-tax income fell 63% in the second quarter of 2024 compared with the same period last year.

Most notably, Southwest Airlines announced in July that it would ditch its open-seating policy and let customers pay for extra legroom, as it faces pressure from the activist investor Elliott Management. It reported a profit of $367 million in the second quarter, but that was still a 46% fall from the same period last year.

Starting this quarter, low-cost carrier JetBlue has axed hot meals for economy passengers on its transatlantic flights. A spokesperson told BI this was "part of our effort to ensure we can continue to provide a great experience at JetBlue's competitive fares." Its second-quarter profits were down 82% from the same period in 2023.

United CEO Scott Kirby told "The Air Show" podcast in June that he believes low-cost carriers are "going out of business" because their business model is flawed and "customers hate it."