Originally Posted by
Aero1900
I have been a firm believer in the ulcc business model and I continue to be. The most surprising thing to me lately has been the financial success of the legacies the last 2 years. They just keep raking it in. But it can't last forever and when travel demand and people willing to pay $750 fur a round trip domestic ticket wane, they will be stuck with their super high cost structure.
Also, for the younger, newer crowd; don't ever forget that this is a brutally hard industry. The history of airline bankrupbankruptcies, furloughs, pay cuts, etc is a long and rich one.
Edit: I thought this thread was in the Frontier subsection. My bad. I thought I was writing to the Frontier pilot group. Sorry if this sounded weird
This is the problem. Once ULCCs get to a certain scale, they actually have to absorb more costs. They have to pay more gate agents, rampers, maintenance, etc. Also, the worker groups have demanded more money. Spirit pilots make signfinicantly more than they did pre-Covid. They had serious trouble getting rampers and gate agents, after Covid and had to raise the prices there. When you fly once per day, you can get away with a peacemeal operation, but once you start getting lots of frequency, you have to build out infrastructure and fixed costs.
The biggest issue with Spirit, according to their SEC filings, is the lack of demand.
Q2: "However, demand for the peak summer travel period has been softer than expected, resulting in lower fare levels on the routes we serve. This summer we are comparing to a period of exceptionally strong domestic and near-field international demand in 2022, while at the same time seeing demand shift away from these regions towards long-haul international. Difficult weather and challenging Air Traffic Control initiatives are also creating a significant headwind to unit revenue.
These trends continued throughout July and we are assuming they will continue into the fall. However, once the international summer travel season ends and kids go back to school, we anticipate that demand will shift back towards domestic. This should mean a more normal pricing and demand environment for the peak holiday travel periods in the fourth quarter."
Q3: “Softer demand for our product and discounted fares in our markets led to a disappointing outcome for the third quarter 2023. We continue to see discounted fares for travel booked through the pre-Thanksgiving period. And, unfortunately, we have not seen the anticipated return to a normal demand and pricing environment for the peak holiday periods. Given these continued trends, we are evaluating our growth profile and our competitive position. We have already taken the first steps by modifying the cadence of our aircraft deliveries through the end of the decade and slowing our capacity growth in the near term. We continue to believe merging with JetBlue and creating a viable competitor to the Big Four US airlines is in the best interest of consumers, Team Members, and shareholders. We are prepared to make the necessary strategic shifts to enable Spirit to compete effectively in this new demand backdrop,”