Summer travelers who relied on Spirit Airlines may struggle to find budget alternatives

Spirit's May 3 demise is not the only curveball confronting people planning trips a week before the summer travel season has its traditional U.S. launch on Memorial Day. Rising jet fuel costs tied to the Iran war have pushed up airfares and associated fees across the commercial aviation industry. Two of the remaining U.S. budget carriers just finalized a merger.

The uncertain outlook for economical air travel reflects how difficult it has become for low-cost, no-frills airlines to operate while squeezed by volatile fuel prices, inflation and increasingly fierce competition. While budget airlines appeal to customers motivated by fare prices alone, traditional carriers can more easily generate revenue to offset fuel costs through premium cabins, membership rewards, corporate travel programs, add-on charges and pricing algorithms.

“Dynamic pricing has taken away one of the last structural advantages that low-cost carriers had,” said Shye Gilad, a former airline captain who now teaches at Georgetown University.

For decades, low-cost carriers thrived by offering fares that traditional airlines often couldn’t match without losing money. But that edge has weakened as the “big three” — American, Delta and United — got better at tailoring prices to different travelers, and as JetBlue, Southwest and other airlines that long positioned themselves as less expensive alternatives began chasing higher-paying customers.

Today, big airlines can sell a handful of bare-bones seats at Spirit-level prices while still charging more for standard and premium tickets elsewhere on their planes. That has made it harder for budget airlines to compete solely on price.

“They can’t just be the cheapest airline anymore,” Gilad said. “They have to be the smartest low-cost airline.”

Like gasoline and diesel prices, the price of jet fuel has jumped since the Iran war put a chokehold on Middle East oil shipments 11 weeks ago. The strain prompted the Association of Value Airlines, a U.S. trade group representing Allegiant Air, Avelo Air, Frontier Airlines, Spirit Airlines and Sun Country Airlines, to ask the Trump administration in late April for $2.5 billion in temporary financial aid.

Airlines for America, the trade group for Alaska Airlines, American, Delta, JetBlue and Southwest, opposed the idea, saying that federal help would give the budget airlines an unfair advantage.

“Government intervention on behalf of those airlines would punish other airlines that have engaged in self-help in order to deal with increased costs and reward airlines who haven’t made those tough decisions,” Airliens for America said in a statement. “And, in the long-term, sustaining businesses that cannot earn their cost of capital harms competition and consumers by making it more difficult for other airlines to compete.”

Transporation Secretary Sean Duffy rejected the request the day Spirit stopped flying.

Even before the latest run-up in fuel costs, consolidation was already underway in the budget airline sector. Alaska Airlines completed its $1 billion purchase of Hawaiian Airlines in September 2024 after the two carriers agreed to maintain the level of service on key routes within Hawaii and between Hawaii and the U.S. mainland where they didn't face much competition.

Spirit was an unsuccessful merger target of both Frontier and JetBlue as its losses mounted after the coronavirus pandemic.

Allegiant said last week it had finalized its roughly $1.5 billion acquisition of Sun Country, a deal first announced in January. The combined airline brings together passenger service with Sun Country's cargo operations and charter business serving sports teams, casinos and the U.S. Department of Defense.

“Consolidation is a signal” of weakness in the industry, Gilad said. “If you can remove a competitor and improve your product offering, you might be able to eke out more profit.”

Other experts note the diversity within the budget airline sector, a factor that could make some carriers more resilient to spiking fuel costs and market disruptions than others.

“Budget airlines are a pretty peculiar creature,” Vikrant Vaze, an aviation systems expert at Dartmouth College’s engineering school, said, describing a category that has encompassed struggling carriers like Spirit to giants like Southwest Airlines, which grew from a low-cost pioneer into one of the largest U.S. airlines.

“Even though they can be clubbed together as budget airlines, if you want a big umbrella term, they’re very different from each other,” Vaze said. “They have very different levels of budget-ness.”

Allegiant's focus on leisure travel centers on smaller airports with less direct competition. JetBlue, a hybrid low-cost carrier, leans more heavily on premium seating and loyalty perks than Spirit ever did.

Frontier comes closest to Spirit’s model as an ultra low-cost carrier, though analysts say it entered this period of volatility with stronger liquidity and could benefit from Spirit’s exit. It has already begun expanding in former Spirit-heavy markets that include Las Vegas, Detroit and the Florida cities of Orlando and Fort Lauderdale.

Gilad sees echoes of his own experience working as a pilot and flight-training instructor at Independence Air, a short-lived low-cost airline that previously served as a regional carrier for United and Delta. The airline, which launched in mid-2004 as fighting between U.S.-led forces and insurgents in Iraq sent fuel prices soaring, shut down during bankruptcy proceedings in January 2006.

“They burned through almost $200 million in 18 months,” Gilad said. “It was just that quick that they were gone.”

He said the same structural pressures remain in place today, but there are fewer remaining budget airlines to share them.