Discount airlines reshaped the U.S. aviation industry by offering cheap fares and charging extra for pretty much every service imaginable. And they made lots of money doing it.
Now, however, those companies are under intense pressure.
Aviation experts say the largest of the discount airlines, a diverse group of businesses known as ultra low-cost carriers, have become victims of their own success. They expanded rapidly, but may have grown too much. Today, they are struggling to manage rising costs and to compete with one another and giants like Delta Air Lines and United Airlines, which co-opted the strategies that made them so successful.
Those and other unique challenges pushed Spirit Airlines, a pioneer of the business model, to seek bankruptcy protection this summer, for the second time in less than 12 months. Other discount operators, such as Frontier Airlines, are in better financial shape, but are no longer consistently profitable, even as some of the nation’s biggest airlines thrive.
“The mainline carriers have effectively figured out how to compete — with higher costs and better service,” said Dan Akins, an economist with Flightpath Economics, an aviation consulting firm.
No-frills carriers have been around for decades and generally followed simple principles: Fly planes full and often. Cut costs as much as possible. Offer low fares but charge for extras.
Spirit helped to popularize the approach. The airline made no apologies for nickel-and-diming customers, which made it the subject of late-night jokes and viral videos.
It paid off. Spirit reported annual profits from 2007, the year after it switched to an ultra low-cost model, until 2020, when the pandemic brought the industry to its knees. Along the way, Frontier, Sun Country Airlines and newer start-ups like Breeze Airways and Avelo Airlines adopted variations of the model. Allegiant Air, another ultra low-cost carrier, adopted the model around when Spirit did.
Three of the four biggest U.S. airlines — American Airlines, Delta and United — were paying close attention and soon began adopting some budget airline tactics. The fourth, Southwest Airlines, is a low-cost pioneer that paved the way for the ultra low-cost carriers, but until very recently it eschewed most of the practices used by the likes of Spirit and Frontier.
Pretty much every U.S. airline now charges fees for checked bags, seat selection and other services once included in the price of a ticket.
American, Delta and United went even further by selling “basic economy” tickets that cost less but have more restrictions. Because those three companies typically flew to more cities with more frequent flights, their basic tickets sometimes appealed more to customers than similar bare-bone tickets offered by the likes of Spirit.
“This is not a high-margin business,” said David Neeleman, an entrepreneur who founded JetBlue Airways, Breeze and other budget airlines. “Taking that share of the business away just kind of doomed” many ultra low-cost airlines.
United’s chief executive, Scott Kirby, last month described the discount-airline business model as a “failed” experiment in the United States. Executives at the discount airlines have said Mr. Kirby was wrong, even though they acknowledge that the their businesses face challenges right now.
Frontier and Spirit did not make executives available for interviews, but each has said it has suffered from an oversupply of flights on key routes in recent years. Frontier’s chief executive, Barry L. Biffle, has also criticized the largest airlines for practices that he says have limited the ability of smaller carriers to add flights at many major airports.
“You can have the planes, pilots, fuel and crews, but if you don’t have the gate, you don’t get to play,” he said this week at a congressional hearing about competition in the airline industry. “Too many of those gates are locked up by a handful of big airlines.”
Spirit said recently that it would furlough one-third of its flight attendants and is giving up some routes. On Friday, it asked a bankruptcy judge to approve a plan to slash its fleet by 40 percent, ending leases for 87 of its 214 jets. The airline has struggled since a federal judge blocked its plan last year to sell itself to JetBlue. Spirit also had other issues, including significant debt and engine problems that grounded many of its planes.
Frontier is doing better but has not made much money in recent years. It did report a modest profit last year, the first full year it has done so since 2019, but lost money in the first half of this year.
Discount carriers have also seen their costs increase. American, Delta and United awarded huge raises to pilots in recent years, forcing the rest of the industry to raise pay for pilots, who are in short supply and take many years to train. Pay for mechanics and other skilled workers has also increased.
By raising pay in parallel, the major airlines “altered the landscape forever,” said William Swelbar, an aviation consultant and economist.
Rising costs make it harder to offer the bargains that budget airlines are known for. Because of swelling airport fees and other costs, for example, Allegiant recently said it would move operations from Los Angeles International Airport, where it has flown for nearly 17 years, to nearby Hollywood Burbank Airport.
“It was becoming too high of a hurdle for us to stimulate enough demand at the right price,” Gregory Anderson, the airline’s chief executive, said in an interview with The New York Times.
Executives at Spirit and Frontier have also blamed a glut of flights on important routes for the problem. But experts say the airlines themselves bear some of the responsibility.
As they grew, the discount carriers bought larger planes and began flying to bigger airports, putting them in more direct competition with the big airlines and other budget carriers, experts said. In the decade through 2024, Spirit and Frontier each doubled their share of all U.S. flights, according to Cirium, an aviation data firm.
“I think they have no one to blame but themselves,” Mr. Swelbar said.
Despite their rapid rise, ultra low-cost carriers account for only about 11 percent of the seats on domestic flights, according to Cirium. American, Delta, United and Southwest control nearly 79 percent.
Those big airlines make billions of dollars in annual revenues from credit cards, and, in recent years, all but Southwest have profited from selling more premium seats and international tickets, which have been in high demand. Those advantages have helped them protect their dominance at many of the nation’s busiest airports.
But some discount airlines are still doing well.
Allegiant, which is based in Las Vegas, operates mostly on routes with no nonstop competition. Its parent company took a big loss last year, but reported profits in the previous three.
Allegiant flies on more than 575 routes, about 75 percent of which are not served by another airline. It also earns revenue from its airline credit card and by selling travel packages that include hotel rooms, ground transportation and other services. The airline is sharply focused on the preferences of leisure travelers, who are its target customers, Mr. Anderson said.
“When there’s no demand, we pull back our capacity significantly,” he said. “And when there is demand, that’s when we’re trying to put as much capacity out.”
Sun Country, a small carrier, has reported profits in each of the past few years. It primarily connects its home base of Minneapolis-St. Paul International Airport to other destinations, but the airline also earns about 20 percent of its revenue from charter flights and half as much from operating cargo flights for Amazon.
Breeze, which is privately held, has been flying only since 2021, but it reported its first quarterly operating profit last year. Mr. Neeleman said the airline ran efficiently and filled a niche by using a fleet of midsize planes larger than those flown by regional airlines but smaller than the jets typical of bigger carriers.
The airline has also found success in seeking profits at smaller airports that larger airlines ignore, he said. For example, it operates nonstop flights between Vero Beach, Fla., and New Haven, Conn., and between Raleigh, N.C., and Ogdensburg, N.Y., a city on the St. Lawrence River near the Canadian border.
“It’s not like we’re going right into their breadbasket offering fares that they have to match,” Mr. Neeleman said. “We’re basically flying between two points that they look at and they go, ‘Good luck with that.’”