How dark is the future of airlines at low cost?
For decades, budgetary carriers have managed to offer travelers without frozen travelers, cheap flights. But this scrappy business model is now crossed as costs are soaring and passengers opt for more comfortable seats and spacious improvements.
The company, it seems, cannot even merge its flesh.
Earlier this week, Spirit Airlines (SAVEQ) again rejected a proposal to acquire Frontier (ULCC), worth 2.16 billion dollars. The offer was similar to the frontier presented earlier this month. The mind has attempt, but its offer has been rejected.
The first border control offer in 2022, for $ 2.9 billion in cash and shares, was thwarted by an offer of $ 3.8 billion in JetBlue Rival (JBLU). Spirit filed for bankruptcy in November after a federal judge ranked on the side of the Ministry of Justice to block his link with JetBlue.
The low-cost carrier model works by offering cheaper seats than traditional airlines to domestic and close to the United States while loading costs for articles such as recorded bags, selection of seats and snacks or snacks or snacks or snacks or snacks or snacks or snacks or snacks drinks. Often, airlines will use secondary airports with lower landing costs, such as Los Angeles Long Beach Airport instead of Lax.
But between the increase in competition from traditional carriers on domestic roads and the increase in labor and maintenance costs, the low-cost model has slowly collapsed.
For example, in the midst of the pressure of militant investors last year, Southwest (LUV) announcement He would put an end to his practice of several decades of open seats as part of a new strategy to increase income. Meanwhile, in January, Frontier also announced that he would start to offer Upgrades of first class seats and seats by the end of 2025.
“This ultra-cup model has disappeared because they have no ultra-basic costs,” the aviation consultant, Mike Boyd, president of Boyd Group International told Yahoo Finance.
“The model,” he added, “evaporates.”
Industry prospects are not encouraging for investors. JetBlue Stock recently tumbled After the prospects of the airline in 2025 disappointed Wall Street. JetBlue cited higher costs and lower income than the results of the fourth quarter in the fourth quarter.
And at the end of last month, the CEO of the Southwest, Bob Jordan, said that the airline “was experiencing an inflation of unit costs greater than normal, especially in the salary rates focused on the market, costs D ‘Airport and health care “. Jordan has referred to a target of cost reduction of $ 500 million for 2027 unveiled during the company’s investor day in the last quarter, saying: “We will be relentless to continue taking costs.”
Cost problems are reflected in equity prices: mostly-traveled transporters have, mostly underperformed the larger airline market.
