About a month ago, Aran Darling booked a cheap red‑eye from Los Angeles to New York for a food‑industry event. Darling and his partner, Izzy de la Meme, run a small venture called Froot Stand, buying and selling exotic fruit from Ventura, California. A big client invited him to a Manhattan event, and the low fare made the trip sensible.
Then the headlines started. Spirit Airlines — which had recently filed for bankruptcy for the second time in a few years — looked like it might be grounded or liquidated. Darling watched the news, called the airline repeatedly, and posted his worry to Froot Stand’s Instagram followers. At LAX, staffers joked that Spirit might go under at any minute. He boarded anyway.
Spirit’s reputation wasn’t helping. Consumer surveys have often ranked it among the least favored U.S. carriers. That stems largely from its extreme low‑cost approach: a very low base fare with add‑ons for almost everything else — carry‑ons, checked bags, seat selection, food, printed boarding passes. Customers jokingly complained it felt like you had to pay to breathe.
Spirit pioneered that aggressive “unbundling” strategy, which goes by many names — price partitioning, drip pricing, nickel‑and‑diming. For years it worked: despite gripes, Spirit grew rapidly by catering to travelers who prized low headline fares over comfort or perks. Former CEO Ben Baldanza famously compared Spirit to a retailer: while others aimed to be Nordstrom or Target, “We’re Dollar General,” he said.
But that Dollar‑General of the skies has faltered. It’s not just Spirit; other ultra‑low‑cost carriers are struggling. Dollar General itself has faced trouble as its core customers pull back. Beyond short‑term shocks like high fuel prices following the Middle East conflict, deeper trends have squeezed budget carriers.
One major shift: legacy airlines learned from the low‑cost playbook and fought back. In the 2010s, budget carriers undercut big airlines on price, prompting legacy carriers to adopt unbundled fares like “basic economy.” These stripped fares mirror low‑cost carriers’ bare‑bones experience — less legroom, no seat selection, no free food — letting big airlines compete on search results and headline prices.
But the legacy carriers didn’t stop there. With huge networks, larger fleets, and established brands, they enhanced loyalty programs — co‑branded credit cards, corporate deals, frequent‑flyer perks, elite status benefits and airport lounges — making staying with a big carrier more attractive. Severin Borenstein, an economist at UC Berkeley, argues these programs skew competition: consumers are steered by loyalty incentives, not just price or service, giving big airlines an advantage that’s hard for smaller carriers to match.
Budget carriers have tried their own loyalty schemes, but scale matters. Rewards from a massive carrier are easier to redeem across many routes, and status benefits are more meaningful. Small carriers that try to partner to boost loyalty value face costs or resistance; in some cases, other airlines even avoid associations with carriers like Spirit.
At the same time, costs have risen. Energy price shocks after Russia’s invasion of Ukraine, and later instability in the Middle East, pushed fuel costs higher. Post‑pandemic labor shortages and tighter labor markets drove wages up, especially for pilots. Legacy carriers tend to pay more, but rising labor costs have hit low‑cost carriers’ thin margins hard. When costs climb, ultra‑low fares become harder to sustain.
Demand patterns have changed as well. Wealthier Americans, buoyed by asset gains, kept spending, but many price‑sensitive travelers cut back. High inflation, rising interest rates, and a cooling labor market have squeezed household budgets; when essentials cost more, discretionary travel is often the first to go. Henry Harteveldt, an industry analyst, notes that even some people earning up to $150,000 report traveling less. For customers who fly only occasionally, loyalty programs matter less, but when discretionary income shrinks, those very price‑sensitive customers stop flying and hit budget carriers the hardest.
That combination — rising costs, fewer core customers, and competition from legacy carriers offering both cheaper headline fares and attractive loyalty perks — has left Spirit in a precarious position.
What happens next is uncertain. At the time this was written, the Trump administration was reportedly considering a rescue package of up to $500 million that could give the government a large ownership stake, and possibly seeking a buyer for Spirit. That would be ironic after the previous administration’s Department of Justice fought to block Spirit’s proposed merger with JetBlue, winning in federal court.
Opinions are split on whether blocking the JetBlue‑Spirit merger was the right call. Some, like Jan Brueckner, an emeritus professor at UC Irvine, argue Spirit would have benefited from joining a stronger carrier. Others, including Borenstein, are skeptical that consolidation is the solution and worry about the broader effects of industry concentration on consumers.
Losing Spirit would likely raise fares on routes where ultra‑low‑cost carriers currently compete, Brueckner warns. Budget carriers have pressured legacy airlines to offer cheaper options like basic economy; without that competitive fringe, legacy carriers might increase those low‑end fares.
In short, Spirit’s troubles reflect more than temporary turbulence. The low‑fare model that once shook up the industry has been blunted by legacy carriers that adopted unbundling and amplified rewards systems, by rising costs that erode thin margins, and by shifting consumer spending that has hollowed out the budget travel market. If Spirit disappears, many flyers who benefited from its rock‑bottom fares could find fewer low‑cost options — even if they never liked the experience.