Spirit Airlines: The Post-Mortem

Subscribe  Apple Podcasts | Spotify | YouTube | RSS

This special episode of the Airline Weekly Lounge, hosted by Gordon Smith with Jay Shabat and Meghna Maharishi, covers the collapse and shutdown of Spirit Airlines, which ceased operations at 3 AM Saturday after creditors and the Trump administration failed to reach an agreement to keep the carrier afloat. Jay traces Spirit's downfall to a runaway cost problem: between 2019 and 2023, capacity grew 33% and revenue grew 40%, but operating costs jumped 76% and labor costs 87% — eroding what had been a Delta-comparable 13.5% operating margin in 2019 into years of consecutive losses. Meghna argues the Spirit-specific ULCC model was clearly broken, citing weak on-time performance, mismanaged first bankruptcy, insufficient cost restructuring, and elevated fuel prices, while noting that Frontier and JetBlue stand to gain the most but are themselves under strain.

The conversation turns to potential industry consolidation, with JetBlue seen as the most likely M&A target given six straight years of losses, though regulators and even Republicans in Congress have shown little appetite for bailouts — Transportation Secretary Sean Duffy has already dismissed the idea. Both hosts agree it's highly unlikely a new ULCC will emerge to fill Spirit's space, given hub dominance by legacy carriers in major markets and the prohibitive economics of high fuel prices on older aircraft. They close by joking that any entrepreneur planning a new US low-cost startup would need a sympathy card or therapy session on the Airline Weekly couch.

Watch This Episode

Transcript of This Conversation

This transcript is generated by artificial intelligence.

Hello, and welcome to the Airline Weekly Lounge. I'm your host Gordon Smith, and for this special episode, I'm joined by both Jay Shabat and Meghna Maharishi. There's of course only one story in town, and that's the collapse of Spirit Airlines.

Hi, Meghna, hi Jay, thanks for joining this special episode of the Airline Weekly Lounge. So many places that we could start, so many places that we will get to over the course of our conversation.

Our thoughts are with everyone who's maybe struggling right now, or is in a degree of uncertainty following the collapse of Spirit Airlines. So our discussion is framed around that.

We are not being completely ruthless here, but we are discussing ultimately an airline that has had a very profound human impact.

0:54

Meghna’s 3AM Breaking News

But with that caveat at the very start, Meghna, you had a rather, I'll try to describe it, unexpected Friday into Saturday night. Tell our listeners what you're up to and what led to you being on CNN at 3 a.m. Yeah.

So I mean, it started kind of slowly trickling in, like on Friday morning that Spirit was preparing to shut down, seen as if the Trump administration and the creditors could not come to any agreement to keep Spirit afloat.

So we kind of started like preparing them for the possibility.

I think even just this past week, like for much of last week, it did become more clear that Spirit was most likely going to go out of business, just because there were a lot of reports coming in that talks were hitting an impasse and they weren't

really going anywhere. And I believe at the last bankruptcy court hearing, that was two Thursdays ago, the lawyer representing Spirit said they really did not have that much cash on hand.

So I think when you combine all of that together, it did seem like a liquidation was going to happen relatively soon. And then I think Friday was just sort of like the final shoe that dropped. And we kind of just figured that this is going to happen.

It became clear in the evening then that they would go out of business at 3 AM. The union started confirming that night that that was going to happen.

And you could also just see on Spirit's website, they did start canceling a lot of flights and you couldn't even track a lot of the flights that were scheduled to go on for Saturday.

So it just became really evident that that was going to happen very early on Saturday. And then I guess that was how we kind of like ended up on CNN at 3 AM. They texted me Friday night and then I was debating it.

And then I kind of figured I was anyway going to be up just in case it happened.

Flying the flag for Skift. Thank you. At all hours, the city that never sleeps, I know you're based in New York, putting that literally this weekend.

Jay, your perspective on the weekend's developments?

2:51

How Spirit Ran Out

Yeah, well, I'll take a step backwards and just maybe explain a little bit how Spirit got to this point, why they were in so much distress and why they run out of money, essentially at the end of the day.

So let me go back to 2019 before COVID and want to compare that year to, I'm going to do 2023. You can do 2024 if you want or 2025, but 2023 was kind of before they started shrinking a lot before they went through the double bankruptcies.

So just for, why not? Let's just do a 2023 comparison. I think it's very telling.

Think about these numbers. Okay, so in between 2019 and 2023, Spirit grew its available seat miles. That's just a measure of capacity.

So they grew their ASMs by a third, 33 percent. That's an extraordinary amount of growth for just those four years. Now over that time, they grew revenue 40 percent.

Not bad. You grow 33. You grow your revenues, grow capacity 33.

You grow your revenues 44. So far, reasonably good. And remember that fares had gone up over that time.

And so now here's, here's where the trouble comes in. They grew the revenues 40 percent, but their operating cost increased 76 percent. And their labor cost alone increased 87 percent.

So you can see where I'm going with this. Their cost just outran their revenues. They get it.

They just basically got beyond the point where Spirit could make money anymore. I want to remind everybody that in 2019, Spirit was one of the most profitable airlines in the world.

And they had, I can look it up here while I'm talking, but they had double-digit operating margins. I have it in front of me here. Spirit in 2019 had a 13.5 percent operating margin.

Delta that year was 13.9. So they were basically doing the same as Delta. United that year, 10.5.

Southwest that year was 13. So, they were right up there with the best of them. And you can see how in 2023, they were losing.

Remember, they lost money 2020, 2021, 22, 23, 24, 25, and in the first quarter, 26 as well. So, that whole losing streak really, I can give you a half dozen reasons why Spirit ran into trouble.

But a big one was just simply that their costs just ran out of control.

Whereas, if you look at a United or a Delta or an American, their costs increased a lot as well, but they had much greater wherewithal to offset that with increased revenues because of their ability to sell premium seats and raise money from their

More levers to pull.

Long-winded way of saying that Spirit had a major cost problem.

Really, really useful insight there, Jay.

6:10

Is ULCC Model Dead

I want to bring back in Meghna. In your view, how much of Spirit's collapse is Spirit specific? We heard from Jay there, cost elements and industry-wide elements that were affecting the airline.

How much of this discussion that we're hearing right now, not on Skift and Airline Weekly, of course, but more broadly in the media, that the ULCC model in the US in particular is dead or at least reaching its limit. How much of that is true, if any?

Yeah, I will say I do think that ultra low-cost model, at least on that Spirit had not the one of an Allegiant or a Sun country, just Spirit, the Spirit specific one is definitely been in trouble and it has been in trouble for the past, yes, since I

think 2023 is a fair place to start, as Jay mentioned. We've seen a lot of reports saying that Frontier and JetBlue stand the most to gain from Spirit going away.

But then also their business models are under so much strain and if fuel costs stay where they are and it seems like they are going to stay elevated, you do have to wonder, will other airlines fall?

I know in an interview with the Wall Street Journal, Spirit's CEO Dave Davis had said that, everybody is burning cash, I think were his exact words. I think that is just something to watch out for.

I think as much of it being Spirit specific, there's definitely some fault there too.

I think you could say maybe even in the mid-2010s when Spirit was still really profitable, I think there were some issues starting to rise, like it's on time performance.

Their whole thing was just customers really only care about the fare and that price and they didn't care about anything else with the product. I think that did start to become a problem even just back then.

I think Spirit did try to make improvements. I will also say the way that Spirit managed its first round of bankruptcy, I think you could also maybe blame them for that.

I don't think that they had the foresight or I think they underestimated how bad things really were during the first round of bankruptcy. I don't think they did enough cost restructuring.

I know that was the whole point of the second round of bankruptcy, but it may have just been too late at that point. And then when you have the fuel shock too, I think it just became almost impossible for Spirit to really come out.

Maybe if fuel prices did not rise as much as they have in the past couple months, maybe Spirit would have had a fighting chance to try out its post-Chapter 11 plan. But I don't know if it would have also just still been delaying the inevitable.

I do think some of the blame can definitely go to Spirit, especially in how they managed that first round of bankruptcy. You also do have to wonder, maybe should they have accepted that offer from Frontier during the first round?

Why did they go with their own standalone plan, which that by itself seemed maybe overtly optimistic.

9:00

Bankruptcy Missteps And Mergers

What say you, Jay?

Was that first bankruptcy too little, too late?

Great points, Meghna. I think right on the money that Spirit probably underestimated.

Just to repeat your words, they more or less underestimated the difficulties of coming out of bankruptcy the first time with just a balance sheet restructuring, not really doing anything to their operating cost.

They changed their revenue model a little bit, trying to chase more premium and things like that, but I think that's very fair.

Then yeah, going back to there was the merger possibility the second time in 24, 25, when Frontier was willing to merge with Spirit, but not on the terms that Spirit found acceptable. Well, maybe they should have accepted in hindsight.

And then don't forget too, that going back to 2022, if I remember early 22, Frontier and Spirit had a merger. Then JetBlue came in to crash the party with a superior offer. They went back and forth a little bit.

Frontier counterbid and ultimately walked away. Well, Spirit at the time, if I recall, they didn't want to merge with JetBlue. And one of the reasons they were arguing to their investors, their shareholders was that this deal has a risk.

People like to call it, this has antitrust hair all over it. I've heard people say that. It has a lot of risk that this deal won't get approved by the courts.

And ultimately shareholders said, no, no, no, but look, JetBlue is just offering more money. We're frontier, we want the JetBlue offer. So Spirit, the management team ultimately had to give in.

But they were kind of right. I mean, well, not kind of, they were right. Their warnings were oppression.

I mean, it was a deal that the antitrust, that the courts deemed illegal on antitrust grounds. So they, that, call it a misstep or lost opportunity or warnings unheeded. But remember, that happened in 22 as well.

Keep in mind, in addition, when JetBlue agreed to merge with Spirit, and the deal was being scrutinized by the Justice Department, and ultimately the courts, during that period of a year, a year and a half, two years, I can't remember, that was a

period where Spirit really couldn't make a lot of the changes that it needed to make. Some, it could do certain things in the margin.

But you can't do radical changes to your business model when you're about to be taken over by another airline, when you have a deal that's come. So there was, that put a lot of limitations on their ability to respond to some of these challenges.

So there was that. I've heard another, I have a list of reasons why Spirit is wound up in collapsing.

But another one that I just heard this weekend, someone was mentioning to me that I wasn't aware of was that during the COVID bailouts 2020, 2021, when the government rescued the airline industry in exchange for certain commitments, they had to keep

everybody employed. One specific commitment was that they had to maintain service to all the current airports that they were flying to or the cities that they were flying to. Well, that's a lot easier to do for an airline like United or Delta.

Okay, we don't really want to fly as much to some tiny city in New Mexico anymore. Instead of having three frequencies on the regional jet, we'll just have one.

Whereas Spirit, you might have a couple of times flying flights per week to Latrobe, Pennsylvania or whatever, they had to keep those even though they might have been losing a lot of money.

So I don't know if that was, I wouldn't maybe rank that as the biggest reason or very, very substantial reason for Spirit's troubles, but just yet another in a long list.

Sure didn't help, Jay.

13:32

DOJ JetBlue Deal Fallout

I don't want to get into speculation territory here, but having read a decent amount of the column inches put out into the beautiful world over the past 24 hours or so, the DOJ is starting to get a little bit of heat, now that the dust is starting to

settle around that JetBlue and Spirit transactional proposed transaction. Do you think Spirit was already beyond repair by the time JetBlue was getting meaningfully interested?

I remember I was there on the first day of the trial and the opening arguments. I think that's when the cracks started to show with Spirit, but I don't think that they were fully beyond repair up until that point. I think that was in October 2023.

I do distinctly remember they delayed their earnings call and the release of their earnings. I think it was the first time it had been delayed.

I think it was partly because their executives were in Boston speaking at the trial, but then also it did seem like things were starting to get bad. I very distinctly remember the judge asking on that day if Spirit's model is viable.

There was the response from the DOJ that it was, that it was more important to keep Spirit as a ultra low cost carrier than to have it merge with JetBlue, because then you would then have the disappearance of the largest ultra low cost carrier in the

United States. Obviously, that still happened now. I think if they approved the merger, it would have at least bought time. But you do have to wonder if JetBlue and Spirit were even truly compatible.

I think JetBlue really just wanted the planes and gates. I think at that time, JetBlue was very ambitious in how it wanted to expand. I think it really did want to go toe to toe with the legacy carriers.

I think that's just very difficult to do in the current environment, but that's what they wanted to do back then. They probably would not have kept Spirit's model at all. They would have just retrofitted the planes.

Maybe they would have also had to do some job cuts.

If they even did keep a low cost model, you do have to wonder if that combined airline maybe would have been reaching the Trump administration for a bailout and wouldn't have been worse if that combined airline went under.

I mean, it's hard to play with hypotheticals. And I can kind of understand some of the scrutiny that the DOJ is getting right now over that. But you could also make the argument that Frontier was probably a better path for Spirit too to merge with.

And their shareholders went with JetBlue because JetBlue made the better offer.

Jay, anything to add?

No, I mean, I was probably in the minority opinion in this when JetBlue was buying Spirit. But I thought it was a good idea. I thought JetBlue would have gained a lot of economies of scale.

They would have eliminated a lot of overlapping routes, northeast of Florida, for example, which would have afforded them more pricing power. One that obviously is all hypothetical, who knows what would have happened.

You know, mergers sometimes live or die by the quality of the execution, and maybe they would have botched it, maybe they would have decreased up, who knows.

But one thing to think about is if JetBlue and Spirit were one airline today, maybe their loyalty program would be of a sufficient size to where whatever, whoever their bank partner was would just not let it die.

Because we've seen this in the past in the airline industry, in the US airline industry in particular.

Just when you think airlines, there's just no way US Airways or American West or this, or even Delta in 2005, there's no way that this airline is going to survive.

Their business plan is they're losing money, the fuel is going up, they're running out of cash. But then American Express comes in and says, hey, here's some more money because we don't want to lose access to that mileage plan.

So, you know, as Barclays or whoever, I can't remember who's doing the JetBlue credit card now. Who knows? They might have just stepped in with some rescue cash.

You know, that's one thing at the end of the day that Spirit didn't have. You know, they didn't have that loyalty plan lifeline. They do have a plan and I think they do.

I don't know, is it Bank of America they work with? I can't remember. But it wasn't worth Bank of America, whoever, you know, their partner.

It wasn't worth their time to rescue, what time and effort to rescue them at the end because the Spirit plan is just not that valuable. So that's, you know, there's a lot of things to think about there.

17:59

Cost Math Writing Wall

Now, just going back, I think your very original question here, Gordon, was, you know, in 2022, 2023, was the Spirit, if the Spirit already kind of dead in the water, was there a zero chance?

Was it damaged goods? Was there rotting on the wall?

And, you know, I think my answer there would be that, I think already by then, I read you those numbers earlier, by 2023, those, you know, revenue and cost numbers, it was pretty clear that for Spirit to have a viable path forward, it would have had

to significantly reduce its operating cost. Easier said than done, you know, it's good, you have labor contracts that are hard to break, you have contracts with Airbus that are hard to break, et cetera, et cetera, but maybe it needed to go into

bankruptcy earlier to get the ability to break some of these contracts, but that's easier said than done too, you know, if you're not running, you know, depending on your balance sheet, you can't just tell your stakeholder or your shareholders, hey,

I'm, you know, I'm going to the courts and invalidating your ownership rights, and you know, so there's a lot of complications there as well. But yeah, I mean, I said it before, I gave you the total revenue and cost trajectory between 2019 and 2023

for Spirit. I also have it on a unit basis rather than a total basis. So their unit revenues, and that's all in including the ancillaries, rose just 5% from 2019 to 2023. You guys want to guess what their unit cost inflation x fuel was?

So let's take fuel out of the equation. So 5% for revenues. It's not going to be pretty.

Any, want to take any wild guesses?

I want to take my neck out. Meghna, go ahead.

I think I'm okay. I'm on the stage.

You guys, come on, come on.

I've got the Kushner. I feel like I'm watching a horror film. Go on, tell us.

It's 27%.

27%. So revenue, RASM up 5%, CASMAX fuel up 27%. So, you know, there you go.

There's obviously, you know, it's, you could see the rating on the wall at that point.

Understood. So much more that we will get into in part two, including what next, who's going to fill the vacuum, if anyone. But before that, a quick reminder to send any questions or comments that you might have for us to podcasts at skif2.com.

That's podcasts with an S at the end. And please don't forget to follow or subscribe to the podcast, whether you're listening or watching.

And if you are enjoying the show, please rate us five stars or leave us a positive review so we can get to you to spread the word about the Airline Weekly Lounge. Don't go anywhere, I'll be right back with Jay and Meghna.

20:34

Part Two What Happens Next

Hello and welcome back to the Airline Weekly Lounge. I'm Gordon Smith, joined this week by Jay and Meghna discussing all things Spirit Airlines. We kind of focused on the before and the present, let's call it the present, the past few days.

20:48

Who Fills Spirit Routes

I want to turn our attention now to what next, because lots of discussion around Fort Lauderdale, around LaGuardia, around the aircraft, the vast majority of those being leased.

Who is going to fill that bare fare market, if anyone, or is the industry just going to say, you know what, we don't need to shoot that low? What's your short to medium term prospects on where the industry goes?

I think you are going to start to see some airlines maybe trying to fill in some of those gaps. We're already seeing it now, like Atlantic City, for example, I think was mostly just Spirit.

Now that they're not there, Breeze and Allegiant, are starting to operate out of Atlantic City. I think the big piece of the pie is Fort Lauderdale though. That was like Spirit's biggest market.

That was basically their home base. Now I think JetBlue was aggressively trying to go into Fort Lauderdale.

I think even before Spirit went bankrupt, I think JetBlue made up an even share of Fort Lauderdale, as Spirit did just because Spirit had been cutting so much. But now JetBlue was adding more routes.

I think over the weekend, they just announced that they were going to add 11 new routes out of Fort Lauderdale. So I think JetBlue is very determined to turn that into a focus city, even on the earnings call. I think Marty St.

George, the president of JetBlue, he said they want to turn Fort Lauderdale into another Boston for them basically. So they're very ambitious there.

So I think you are going to start to see some of those gaps being filled, but I think all the other low cost carriers and the ultra low cost carriers, I don't think any of them are big enough to really fill whatever hole that Spirit had.

I think LaGuardia is going to be difficult. I think New York is generally very difficult to compete and to begin with. Maybe Frontier might take some of those slots out of LaGuardia.

I'm not sure. I think Frontier did move to a different terminal at LaGuardia though relatively recently. So I think a lot of that is still up in the air.

I think also just given the high fuel costs and the fact that the industry has already I think raised fares like five times since the Iran War started. I think fares are also just going to go up.

There's no incentive for the floor to be really low or for the floor to be where Spirit had it at, I think going forward.

Jay, Spirit served, as Meghna says, those price-sensitive travelers, those hyper price-sensitive travelers in some cases. There were some routes that frankly some legacy carriers won't want. There will be a bit of cherry picking going on.

We've already seen that in the past 72 hours.

23:19

Fares Rise And Route Gaps

Is there a risk that there's a lot of valuable routes, important routes that don't get picked up and are never fully restored with a non-stop service like Spirit could offer? Sure.

Yeah, there probably will be, especially quite a few if fuel prices keep going up.

Then again, if fuel prices drop 30 percent tomorrow, then airlines will take on more planes and enter more routes and fares will fall regardless of what happens to Spirit.

So fares are determined by more than just one particular airline exiting the scene.

However, sure, you remove one major significant airline, particularly significant in certain markets like Florida, you remove them from the industry, then yeah, the remaining players are going to have more pricing power for sure.

So yeah, there will be. And you could see it. I was looking recently for a flight from Newark to Detroit, just random.

They were pretty big in Detroit. And everybody else, United flies that route, Delta flies that route. All those airlines were much, much, much, much more expensive than Spirit.

It was like, I'm doing this from memory here. This is just loosely. But it was like $400 versus $150 or something like that.

So even for the basic economy product.

Yeah, this was just like the cheapest seat that showed up on Expedia for a week and a half, two weeks out, probably was looking.

Obviously, that, sure, that may be the basic economy because they were United and Delta were almost full. They weren't offering basic economy, so it's possible that they were matching on that. It just wasn't available on the flight.

Of course, you have to look flight by flight. But it is an example, and I'm sure it's not the only one, where Spirit was legitimately just by far and away, the lowest fare available. So yeah, that's gone now.

25:26

What Low Cost Still Works

I think just speaking more in a broader sense here, and Meghna alluded to this before, people talk about how, well, the low cost business model doesn't work in the US anymore, and that's not really accurate.

Allegiant, our friends at Allegiant, just reported a fantastic first quarter. I think what's the proper way to view this is that the Spirit, the old way of providing low cost service in the United States doesn't work anymore.

But the Allegiant way, which is a different way, it's different business model, that works very well. And Spirit, incidentally, in its final days, final weeks, final months, was trying to convert to an Allegiant-like model.

They just ultimately ran out of time and money. Sun Country has a similar model like that. Frontier is kind of bouncing around.

You know, there are certain reasons why adopting an Allegiant business model can be challenging, can be difficult, depending on, you know, your aircraft costs and things like that. We won't get into that.

But you will absolutely see in the coming years, Breeze, by the way, is a very Allegiant-like airline in many ways. And we've written and spoke about that before.

If anybody has, you know, any questions about that, we can refer you to things we've written. But you have to believe over time, now Allegiant is not growing right now, they're actually shrinking right now.

But over time, after Allegiant, they're merging with Sun Country. They'll, you know, eventually be getting more planes. Breeze is getting more planes.

Those successful models are the ones that are going to enter more markets, bring fares down for people. You know, everything is very dynamic. There are a lot of changes.

Great point, Jay.

And I think it's very easy, very tempting, especially from this side of the Atlantic, to sort of homogenize the US low-cost scene, when actually there's so much nuance.

And actually, you know, the difference between Spirit and Frontier and Legion and Breeze and, you know, Colgeblou, a low-cost carrier, if you want, certainly not always a low-fare carrier. Lots and lots of nuance in the business model.

27:32

Mergers Partnerships After Spirit

Meghna, just some final thoughts from you, if I can.

We've had lots of chatter around whether the past events of the last 72 hours or so, as we're recording here on the 4th of May, may influence DC decision-making around future mergers, acquisitions, et cetera.

I kind of guess what you're both going to say, but I'm going to ask the question anyway.

Does the events that we've seen over the past few days make it less likely or more likely that the DOJ and others in DC may approve or be more mindful of approving mergers and acquisitions?

American and United. I finished a sentence for you. Go ahead, Meghna.

Here's me trying to be diplomatic, Jay.

Go ahead, Meghna.

Yeah. So, I mean, with the DOJ, I think anyway, like under the current administration, I think the regulatory environment is a little bit more relaxed compared to the previous administration.

The previous administration did take a much harsher view towards antitrust enforcement, which is why I think you saw them successfully sue to block the JetBlue merger, and then you also saw them sue to block the Northeast Alliance, which was also

approved by the first Trump administration. So I don't know if necessarily Spirit going away changes that exactly. I also don't really know what are the chances of a United American merger if American is completely closed off.

I think like Scott Kirby's statement last week, I think he was trying to appeal to their board and maybe to DC as well.

But from what I understand of American's board is that they do not seem interested in really changing and they seem to be fine with the current leadership there too. So I feel like the chances of that happening are probably quite low.

But maybe for other M&A, like maybe more in the low cost space, I think maybe you could see that happening too, especially if these fuel prices continue to increase. That might make mergers just more appealing for them too.

I think on the bailout front, I think that's just really hard to pitch. I'm not really sure how open this administration will be to bailing out low cost and ultra low cost airlines if fuel prices go up.

Because I will say, just also given some of the recent news over the weekend about the Iran War, it does look like fuel prices are just going to continue to go up.

That will put a lot of strain on a lot of other airlines, like I think JetBlue and Frontier in particular.

But I'm really not sure how the bailout is going to go, because even from the Spirit bailout, there was a lot of opposition to it, even from Republicans in Congress.

A lot of them seemed to really be against this, and because it would have been putting taxpayer money into an airline that was already losing money, and it just was not a guarantee that Spirit would turn profit even if it did get a $500 million loan.

I think transportation secretary, Sean Duffy, already threw cold water on the other ultra-low-cost carriers asking for a bailout, saying that he didn't think it was necessary.

He also appeared to be against giving a bailout to Spirit as well for a lot of the same reasons. We'll see where it goes. I think there's still definitely going to be a high appetite for M&A and maybe also partnerships.

We also did report, along with Bloomberg, that American and Alaska are exploring some sort of partnership that would be like the Northeast Alliance, but maybe on a bigger scale because there would be a big international component to it.

We could also just see more of that happening as well.

Great point. I think lots of attention and headlines around, if it's not a full merger, it doesn't really count.

Of course, Joanna Garrity and Scott Kirby, when the Blue Sky announcement came out with JetBlue and United last year, they said, this is not a merger, it's not a precursor to a merger, etc. But it's still an important commercial partnership.

Jay, what's your perspective in the post-Spirit operating environment? Maybe slightly more sympathetic here in DC or businesses as always been?

Yeah, I think the regulators will be amenable to certain merger deals if they come about. I think I agree with Meghna that American, United, very unlikely.

But I think JetBlue is the one everybody's watching because they're clearly financially distressed at this point. They, day two, lost money in six straight years now and had a pretty rough first quarter as well.

I remember for them, first quarter should be pretty decent because they have a lot of Florida, Caribbean, which that stuff peaks in the first quarter. So they, you know, who's going to merge with JetBlue, if anybody?

And, you know, United has kind of raised the point that, well, if we're going to do a deal, we want to do a big one because it's, there's a lot of hassles involved with any merger.

And if we're not going to get, you know, if it's going to be just a relatively small airline like JetBlue, then maybe it's not worth it. So, you know, we'll see. Frontiers, another one kind of out there.

Will they merge with anyone? But, you know, that's just a big open question.

Of course, and I think Meghna just, I'm just repeating this again, Meghna already said this, but as if fuel continues to go up, that does put further pressure on airlines to take bolder action. One of those actions be, you know, consolidation.

So, that remains to be seen on where fuel prices go and where the other, you know, giant, giant question we haven't even talked about is what happens if high fuel prices or any other problems break the economy, break the consumer, the American

consumer. Right now, Americans are just as eagerly traveling as ever. You know, there's been five or six major fare increases just in the past couple of weeks here. Yet, hey, I'm still going to Europe this summer.

I'm still going to Japan this summer. I'm still flying first class. I'm still, you know, still, still doing my thing.

Does that change? And, you know, that's another giant question mark.

33:34

Can A New ULCC Launch

I will also add, I feel like sometimes I've heard people say like, oh, with Spirit gone, maybe there'll be another airline that forms in its wake and to fill up that space.

I think that's, I mean, that's also just, I don't think that's going to happen at all. You know, a lot of airline executives have said since COVID that the industry has structurally changed.

I do think to a certain extent that is true, at least like right now for the past like four years, we've seen like premium and international travel really be the big profit drivers.

And I do think it's also nearly impossible to compete in a lot of the big markets that Spirit was in.

It's hard to see like an ultra low cost carrier being successful in like New York or Los Angeles or Chicago, or even like maybe Dallas, just because like these areas just have these huge hubs for these legacies.

And I think that, you know, I've heard this before from other executives, it's just impossible to, you know, start an airline and then say you want to like fly out of New York or something. It's just not going to happen.

So I think that's just also something that's like worth touching on. Like I just, I don't think that there'll be another like ultra low cost carrier coming in the wake of this anytime soon.

Maybe unless consumer spending patterns change dramatically, but that does not really seem to be the case right now.

Yeah, I mean, if there was a low cost carrier that, you know, a new one that came to the scene, and somehow was successful, it would probably look more like a Legion. You know, that's the model that clearly is working in this environment.

However, you know, right now, just access to aircraft is very difficult. I mean, sure, you can maybe get some, you know, we don't know. I mean, some of that Spirit fleet, we don't know where that winds up.

I mean, you would think, as before fuel prices went up anyway, those would be pretty easy to re-market.

I mean, someone, you know, some airline in Asia or Africa or, you know, India, hey, my Boeing and Airbus, they're not delivering my planes and I want to grow. So, yeah, I'll take some of those Spirit planes. There is very eager demand for aircraft.

Is that eagerness still exists with fuel prices going to, you know, $4 or $5 a gallon? Maybe not. But then again, if you're some entrepreneur with a low cost, US low cost, you know, startup business plan, how do you make it work?

Even if you can get access to cheap aircraft, how do you make it work with, you know, $5 oil, $4 oil? It becomes, you know, and especially if you have to use older aircraft, it's going to be, you know, that are less real efficient.

So it's hard to see, you know, let's put it this way. If you know of any entrepreneurs who are thinking of starting a low cost airline in the US., let me know, I need to send them a sympathy card or have them checked it for some kind of therapy.

Or I wouldn't-

Five thousand advance.

Yeah. Yeah. Maybe we can charge money for therapy we can provide out that service.

So yeah, it's very hard to see a new airline entering the scene given current conditions.

Take a seat on the Airline Weekly Shazlong, and we will be your shrinks and offer a little bit of therapy.

36:42

Final Thanks And Wrap

But in all seriousness, Jay, Meghna, thank you so much for sharing your insights. I appreciate it. It's a very, very busy time for both of you.

So much more we could get into, but we will have more detail on skift.com. And a reminder that if you're an Airline Weekly subscriber, you get full access to all the daily airline news on skift.com included in your subscription.

And if you're not already a subscriber, go to airlineweekly.com/subscribe to get a free trial issue. Wow. Okay.

I wish we could go on for longer. I've got so many more questions, we didn't get through them all, but I think that's the nature of the story. It's not going away.

We will continue the discussion in future weeks and across our coverage, like we say on Airline Weekly and Skift.

But Jay, Meghna, thank you for joining me this week, and thanks always to our producers, John, Monica and Will, and wherever you are in the world. Thanks for listening, thanks for watching, and we'll catch you next time. Bye for now.

Whether you're listening to us on Spotify, Apple, or wherever you get your podcasts, please remember to subscribe, rate us five stars, or leave us a positive review.

This really helps us get the word out about the Airline Weekly Lounge, so we can continue to bring you this podcast every week, absolutely free of charge.

If you're watching us on YouTube, be sure to subscribe to the Skift channel and hit the notification bell to find out whenever a new video drops.