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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.”