Alison Sider
Appearances
The Journal.
How Spirit Airlines Landed in Bankruptcy
Spirit brought to the airline industry the idea that everything is a la carte and customers pick the options they want and pay extra for them. That was kind of an innovation. That's not how airline tickets were sold 20 plus years ago. And now it's increasingly how all airline tickets are sold even at the upper end of the market.
The Journal.
How Spirit Airlines Landed in Bankruptcy
Yeah. I mean, I think in some ways Spirit was a victim of its own success or, like, the success of its business model.
The Journal.
How Spirit Airlines Landed in Bankruptcy
I mean, the U.S. airline industry, it's really dominated by four huge airlines. United, American, Delta, and Southwest Airlines. They came to their current form after a bunch of bankruptcies and mergers, and they dominate about 80% of the domestic travel market. And it's really hard for smaller airlines to kind of get the scale that they need to really be relevant.
The Journal.
How Spirit Airlines Landed in Bankruptcy
I think probably Spirit Airlines is the one that people generally have the strongest opinions about.
The Journal.
How Spirit Airlines Landed in Bankruptcy
Because if you are picking what flight you want to take and picking what airline you want to take, if Spirit only has one flight a day in your airport and American has 10, that just makes them a lot more interesting to you. So smaller airlines... all kind of are facing this challenge of like, how do we get bigger? How do we actually take on the bigger airlines?
The Journal.
How Spirit Airlines Landed in Bankruptcy
No, I mean, I think at the time when Spirit was talking about merging with Frontier, the conversation was really about, you know, we're going to create this nationwide low fare competitor that's really going to challenge the big airlines. Spirit is kind of a little more focused in the east and Frontier is kind of a little more focused in the west.
The Journal.
How Spirit Airlines Landed in Bankruptcy
And they were going to bring it together and just be this big budget presence that was just going to have a lot more scale and a lot more reach.
The Journal.
How Spirit Airlines Landed in Bankruptcy
JetBlue kind of swooped in with a competing offer for a lot more money. And it set off this very fierce bidding war. Drama, drama, drama. CBS News transportation correspondent... What did JetBlue want with Spirit? You know, they sort of wanted the same thing that Frontier did. They really wanted to grow. And they wanted especially Spirit's planes and its pilots.
The Journal.
How Spirit Airlines Landed in Bankruptcy
Spirit and JetBlue, they have the same type of fleet. At the time, there was a pretty significant pilot shortage developing in the U.S. So they really just saw this opportunity to, like in one fell swoop, just become a lot bigger. That it would be JetBlue that's going to become kind of the national challenger to the bigger airlines.
The Journal.
How Spirit Airlines Landed in Bankruptcy
People who love spirit and maybe love is a strong word, but people who tolerate spirit, you know, it's just the fares are cheap and that is really meaningful. I mean, that allows people to travel, take trips that they ordinarily wouldn't be able to, you know, spoken to people who are in a long distance relationship.
The Journal.
How Spirit Airlines Landed in Bankruptcy
And Spirit and JetBlue negotiated a deal that they agreed to in July of 2022, a $3.8 billion deal.
The Journal.
How Spirit Airlines Landed in Bankruptcy
So that sounds great for flyers, but, you know, antitrust enforcers are concerned when they hear that because it means... you're taking away a lot of cheap seats from the market. You're also taking away this kind of maverick airline in spirit that goes into markets with bargain basement fares and forces all the other airlines to lower their fares.
The Journal.
How Spirit Airlines Landed in Bankruptcy
So the Justice Department is very concerned that this merger is going to result in higher fares and it's going to be bad for consumers.
The Journal.
How Spirit Airlines Landed in Bankruptcy
A judge blocked the Spirit-JetBlue merger, said it's bad for consumers. And he said kind of famous last words. He said in his ruling, you know, Spirit is a small airline, but there are people who love it. And, you know, Spirit fans, this one's for you.
The Journal.
How Spirit Airlines Landed in Bankruptcy
This ultra-low-cost carrier business model kind of just fell apart, like, really pretty rapidly. That's next.
The Journal.
How Spirit Airlines Landed in Bankruptcy
And, you know, if you're visiting someone once a month, it makes a huge difference to pay a hundred dollars or less for a round trip ticket. And you're willing to put up with a lot to make that happen.
The Journal.
How Spirit Airlines Landed in Bankruptcy
You know, business travel wasn't fully back. So the bigger airlines were flying a lot more on the kind of Florida, Vegas, these domestic leisure routes that are sort of the bread and butter for the discount airlines. And that weighed on airfare.
The Journal.
How Spirit Airlines Landed in Bankruptcy
The large legacy airlines over the years started kind of picking up at least parts of what Spirit was doing. So, I mean, for example, the bigger airlines started adopting their own kind of no-frills tickets called Basic Economy. And it's kind of their answer to Spirit, where you get only a ticket or, you know, it varies a little bit exactly what you get, but it's pretty bare-boned.
The Journal.
How Spirit Airlines Landed in Bankruptcy
In United's case, you can't even bring a carry-on.
The Journal.
How Spirit Airlines Landed in Bankruptcy
There's so much more competition. And it is not winning. Bigger airlines have gotten so much more effective going up against it. And it hasn't really had as much of a compelling offering as it once did.
The Journal.
How Spirit Airlines Landed in Bankruptcy
I mean, they're called ultra low cost carriers. And the whole point is that they have the lowest costs and that allows them to charge the lowest fares. But now, you know, there are labor shortages coming out of the pandemic. All the airlines have to raise wages for everyone. So, you know, they don't really have as much of an advantage anymore on costs.
The Journal.
How Spirit Airlines Landed in Bankruptcy
Spirit being in Chapter 11 does not mean that's it for the company at all. In fact, most major airlines have gone through bankruptcy at some point in their history. It's been a while. The last really big one was American Airlines in 2011. But it's kind of a rite of passage for an airline, to be honest. A lot of them come out of it.
The Journal.
How Spirit Airlines Landed in Bankruptcy
Often there's like a merger that results, but they do come out of it most of the time. They keep flying. So Spirit is telling all its customers, like, you can still book us for the holidays. Your flight's going to be okay. There is a good chance that Spirit is not going away.
The Journal.
How Spirit Airlines Landed in Bankruptcy
What could a revamp Spirit look like? So Spirit is saying, you know, part of its revamp is going to be sort of an altered business model. Like it wants to appeal to more flyers. And that means going after some of the more upscale flyers that have been choosing bigger airlines because there are more premium options. So they rolled out a couple of months ago.
The Journal.
How Spirit Airlines Landed in Bankruptcy
And what do the haters say? It just isn't the most luxurious or the most comfortable airline.
The Journal.
How Spirit Airlines Landed in Bankruptcy
a bunch of new kind of bundles called like Go Big, Go Comfy, Go Savvy, I think is one of them. And they're just like new upselling seating options. Like they've always had the big front seat, which is actually kind of a great deal. Now the big front seats, if you book it, it's going to come with drinks and snacks and like priority boarding and familiar things. Yeah.
The Journal.
How Spirit Airlines Landed in Bankruptcy
You know, it's interesting kind of as the bigger airlines are embracing this kind of a la carte menu, Spirit is going after more of a bundled ticket that now includes a bunch of extras and amenities, you know, to kind of buy up. Yeah, it's funny.
The Journal.
How Spirit Airlines Landed in Bankruptcy
Yeah exactly, they're kind of converging on very similar business models.
The Journal.
How Spirit Airlines Landed in Bankruptcy
So JetBlue has said they've been asked and they're kind of working on their own turnarounds plan because they're facing a lot of similar issues. So they've said, like, they're not interested in revisiting the Spirit deal. You know, Frontier, I mean, I think a lot of people think it's still possible that they could reemerge. Or there might be another airline that kind of has interest in...
The Journal.
How Spirit Airlines Landed in Bankruptcy
At least in Spirit's assets, like its planes. So we'll see.
The Journal.
How Spirit Airlines Landed in Bankruptcy
Well, I think it's fair to say it did not go as hoped. You know, Spirit, it's going to be smaller this quarter than it was a year ago. And it said its flying capacity is going to be like sharply lower throughout next year.
The Journal.
How Spirit Airlines Landed in Bankruptcy
I just cannot imagine that this outcome, Spirit in bankruptcy, Spirit, you know, readjusting its business model to focus more on high-end consumers, that this is what they had in mind.
The Journal.
How Spirit Airlines Landed in Bankruptcy
I mean, I think it tells us that the big airlines are really the big winners of the last several years. They figured out how to compete with the smaller airlines and kind of neutralize the competitive threat. And they figured out how to get us all to pay more, you know, for all of these add-ons for premium flying.
The Journal.
How Spirit Airlines Landed in Bankruptcy
The coach experience, the economy experience is not as much as included as it once was. It's not as expensive, but it's also you don't get as much. And so you're going to have to pay for everything if you want extra legroom, if you want to board earlier, if you want to pick your seats. You know, it's all going to cost you.