Opinion: Learnings from Spirit Airlines’ ashes

​While the model didn’t quite take hold in Australia, Spirit was widely successful in its bid to disrupt the market in America before, unfortunately, falling victim to its own success – among other things.

The rise

Originally a trucking business in Michigan, Spirit started its airline journey as a charter operator, flying rich businessmen between Las Vegas and Atlantic City to gamble. The airline rebranded as Spirit Airlines in 1992, though its market-changing ULCC model didn’t firm up until the early 2000s.

The low-cost carrier model was firmly established, with airlines reducing frills (like charging ports or, say, legroom) to cut costs and pass on the savings to passengers. But Spirit took it to the next level, and was the first of its kind in the US.

It was able to slash base fares down as low as possible by adding an upcharge on everything bar the seat itself; from baggage, carry-on, onboard snacks – even printing out your ticket at the airport cost you extra. The model, while controversial, gave travellers the opportunity to save big if they were willing to sacrifice on comfort, while Spirit, at times, made 40 per cent of its revenue from additional fees and charges.

The model successfully opened up air travel as an option for a whole cohort of Americans who had never flown before. And yet, routine flyers realised that if they were willing to give up some luxuries, they could save significantly on Spirit routes compared to legacy airlines.

Market madness

Spirit’s impact on the market was undeniable. Customer satisfaction wasn’t great, but dollars speak louder than words. By 2015, Spirit was the most profitable airline in the US (by profit margin), and the full-service legacy airlines were clearly not happy.

In turn, the full-service carriers unbundled their own fares, introducing “basic economy” options that matched Spirit’s prices while offering the loyalty perks and customer service customers were used to. These airlines were also able to use their premium seat offerings and frequent-flyer programs to subsidise lower fares and undercut Spirit on key competitive routes.

The pilot pandemic

Right when Spirit was being squeezed the most by the larger market players, the pandemic hit. The US government didn’t impose blanket restrictions on air travel; however, as a leisure-only travel provider, Spirit’s bottom line was immediately affected. Meanwhile, around 7,000 US pilots decided they were sick of the boom-and-bust nature of the industry and left voluntarily – on top of the dramatic number of early retirements.

In truth, no one expected the air travel industry to bounce back as quickly as it did following the widespread adoption of COVID-19 vaccines. By 2022, air passenger figures had already shot up to nearly 90 per cent of pre-COVID figures, and airlines were desperate to increase capacity as quickly as possible. With fewer pilots available, US carriers were doubling entry-level pilot wages to attract and retain talent. To have any shot at catching the market’s upward momentum, Spirit had to match these rates, further eroding its now-slim profit margins.

The final blows

Disaster continued to strike. Nearly 40 per cent of Spirit’s fleet – Airbus A320neo family jets with Pratt & Whitney PW1100G GTF engines – were impacted by factory recall and mandatory safety testing due to manufacturing defaults within the turbines. The planes were immediately grounded and inoperable until inspections could be completed.

Meanwhile, back-to-back fuel crises sparked by conflict in Europe and the Middle East saw the airline’s fuel costs double its projections. Amid the chaos, the once-prosperous Spirit was burning cash quicker than it could handle. The airline agreed to a $3.8 billion acquisition by leading LCC JetBlue, a deal that would have seen the two combine to form the fifth-largest airline in the country.

​But that deal was struck down by the US Department of Justice over antitrust violations and anti-competition concerns. In particular, the department acknowledged Spirit’s significant role in the marketplace and suggested that a merger with JetBlue would lead to higher airfares for consumers. Or perhaps the risk of a genuine challenger – a large, healthy, low-cost carrier – was too much for corporate America to bear. Alas.

An ironic end to Spirit, really. After two attempts to navigate bankruptcy, the airline shut down for good on 2 May, 2026, leaving thousands of staff and passengers in the lurch.

The takeaways

So what does this mean for us here in Australia? It tells us that a challenger airline model like the ULCC is possible and can be successful, but also that it’s fragile. Operating on slim operating margins in a boom-and-bust industry like aviation means any operation is a few poor decisions and a twist of fate away from total destruction.

To me, the closest thing Australia has seen to success in this area was Tiger Airways when it was a Virgin Australia subsidiary. In most markets, a low-cost carrier can thrive and is widely popular with consumers. However, when the going gets tough, it certainly helps to have the stability of a major airline, as well as diversified income streams like loyalty programs, credit cards, and corporate partnerships.

As an avid fan of the underdog, here’s hoping that the new airlines on the block have it in with a chance. Good luck and godspeed!