Bankruptcy is a funny thing; it can actually resurrect previously failed business plans, and that’s exactly what might happen with Spirit Airlines second Chapter 11 in a year. Last year, the federal government clonked a merger between Spirit and JetBlue that would have rescued the canary-colored no-frills carrier. But that option is now reportedly back on the table.
A merger or sale of Spirit’s assets has widely been discussed as potentially the best outcome for the airline…. The carrier has struggled to grow revenues faster than costs since the COVID-19 pandemic, leaving a trail of red ink in its wake…. Spirit has made several failed attempts since 2022 to merge with Frontier and JetBlue.
We’ve already discussed the challenges to Spirit’s oft-maligned but innovative approach to flying passengers around at dirt-cheap prices. We’ve also pointed out that Spirit’s competition has not hesitated to troll the low-cost airline after it entered a second restructuring. And now we probably should not be surprised that previous suitors have re-entered the conversation.
Consolidation is the name of the game
If a slimmed-down Spirit can exit bankruptcy via a merger, then the no-frills airline model has a chance to preserve itself against the major carriers’ attempts to absorb low-cost innovations while yoking them to more upscale offerings. As it stands, Spirit’s second run through Chapter 11 is going to yield an airline that is a shadow of what it once was. JetBlue’s glory days are also a fading memory. Frontier’s business models parallels Spirit’s, so any combination of the three would at least create a budget-friendly carrier that could preserve robust competition on the U.S. market.
Ironically, the proposed JetBlue-Spirit merger was killed by Washington because the government argued that the tie-up would limit options for consumers. What they missed was the degree to which the no-frills concept has lost its mojo. What the feds really needed to do was allow two important disruptors to save themselves and enable ongoing competition to thrive. There’s a good reason that United Airlines, following Spirit’s second bankruptcy declaration, immediately went after the latter’s customers.
Is no-frills dead?
Spirit’s financial struggles can be traced to the no-frills model running out of gas. Flying people around for the absolute minimum investment possible had its day, but fliers now seem to want more. The major carriers now offer very cheap fares, but simultaneously provide plenty of chances to upgrade, and travelers appear to have moved past the era when they would accept uncomfortable conditions to spend very few dollars to get from point A to point B.
Consolidation among the low-cost carriers would allow budget-conscious fliers to retain some power to shape how the big airlines run their operations. For the likes of Spirit, JetBlue, and Frontier, battling it out with each other is now pointless. That’s why there have been merger discussions between both Spirit and JetBlue and Spirit and Frontier: the execs who run these companies know that the battle for passengers has moved elsewhere. The market has changed, and although Spirit was instrumental in changing it, low-cost airlines need to adapt to a new reality
