Spirit Airlines Shutdown Expected to Push Up US Airfares as Budget Competition Tightens

NEW YORK, United States (AFP) — Aviation specialists are warning that the collapse of ultra low-cost carrier Spirit Airlines will likely add more pressure to already-rising airfares in the United States.

Spirit, which started operations in 1992, became known for what industry observers call the “Spirit Effect”: a no-frills model that made flying possible for many passengers who could not otherwise afford tickets.

In 2023, while trying to stop a JetBlue merger, the US Department of Justice (DOJ) said Spirit’s stripped-back approach — with no complimentary meals, baggage, or similar add-ons — gave the market a distinctly disruptive jolt.

The DOJ said, “When Spirit enters a new route, prices for consumers across all airlines tend to fall and demand for air travel goes up,” adding that Spirit’s entry into a market produced an immediate 17 per cent fare decline, while leaving a market was linked to an average 30 per cent fare increase.

Those concerns have sharpened since Spirit halted operations on May 2, at a time when ticket prices were already climbing because jet fuel has become more expensive amid the Middle East war.

This week, the US Department of Transportation reported that jet fuel costs for US airlines jumped 56 per cent in March compared with February, and were 30 per cent higher than in the same month last year.

Jan Brueckner, emeritus economics professor at the University of California, Irvine, said airlines are likely to keep “basic economy” products that were first rolled out to battle Spirit and other budget carriers, but warned the price point may move up. “But they may raise” the ticket price, Brueckner said. “I don’t think these tickets are going away necessarily, just that they might be less attractive.”

Richard Aboulafia, an aviation analyst with consultancy AeroDynamic, said there is “no question in some markets fares will probably increase”. Richard Masler, head of analysis at the Centre for Aviation, said Spirit spent more than a decade pressuring legacy players to respond with cheaper fares and more itemised pricing.

As Spirit shut down on Saturday, other airlines began rebooking affected passengers while also trying to capture the carrier’s strongest routes. That market response has included low-cost operators Breeze, Avelo and Frontier, which have generally set fares above Spirit’s levels.

Carriers have either launched service on routes Spirit abandoned or expanded flights where they had competed directly with the airline. Frontier Chief Executive Officer James Dempsey said on an analyst call, “Spirit played a meaningful role in providing affordable travel to a wide range of consumers in an industry dominated by four major airlines.”

Frontier said it will introduce nine routes this summer and add 15 daily departures across 18 former Spirit routes. Frontier Chief Financial Officer Robert Schroter said the additional flying should raise a key revenue metric by three to five per cent, while overall capacity is projected to increase by six to eight per cent.

Bradley Akubuiro, a partner at advisory firm Bully Pulpit International, said Spirit forced competing airlines to “price differently”. He said travellers are not facing the total loss of access to air travel, but the lowest-price tickets are expected to become harder to find in some markets. Akubuiro also said fares may keep rising over time because “a meaningful check on the system is now gone”.