About a month ago, Aran Darling booked a cheap red-eye from Los Angeles to New York for a work event. He and his partner run a small produce business in Ventura, California, and the trip was a networking opportunity. He felt good about the bargain fare — until headlines began saying Spirit Airlines, after filing for bankruptcy a second time, might be grounded and forced into liquidation.
Darling fretted, checked the carrier’s site, called repeatedly and posted updates to followers. The worry wasn’t just practical: Spirit isn’t beloved. Consumer surveys have long ranked it among the most complained-about carriers. That’s because Spirit built a business on stripping almost everything from the flying experience to offer rock‑bottom base fares. Carry‑ons, checked bags, seat selection, food and even printed boarding passes come with fees. As Darling put it, “If you wanna breathe, you gotta pay extra.”
That ultra‑low‑fare, “unbundled” model — sometimes called drip pricing or nickel‑and‑diming — made Spirit a pioneer. Its late CEO Ben Baldanza famously said other airlines might try to be Nordstrom or Target, but Spirit wanted to be Dollar General: cheap and no‑frills. For a time the model worked: Spirit grew rapidly even as it was unpopular with many flyers.
But in the 2010s and into the 2020s, the dynamic shifted. Legacy carriers like Delta, American and United adopted many of the budget tactics — notably “basic economy” fares that mimic the bare‑bones experience — so they could compete on headline price. More important, though, the big airlines leaned into what they have in abundance: scale. With larger networks and fleets, they built powerful loyalty ecosystems — frequent‑flyer programs, co‑branded credit cards, corporate contracts and perks such as early boarding, seat selection and lounge access — that encouraged flyers to stick with them despite basic fares being similar.
Economists say those loyalty programs distort competition. Severin Borenstein, a UC Berkeley economist, argues that rewards and status make consumers choose carriers for reasons beyond price and service on a single flight, tilting customers toward airlines with broad networks and established programs. Smaller budget carriers have tried loyalty tactics, but they can’t match the reach and perceived value of legacy carriers’ programs. Partnering to add value is possible but costly for small airlines — and sometimes other carriers avoid association.
At the same time, the cost environment worsened for low‑cost carriers. Fuel prices rose after geopolitical shocks, and post‑pandemic labor tightness pushed wages up — especially for pilots. Legacy airlines generally pay more, and rising labor and operating costs hit ultra‑low‑cost carriers’ margins hard. When costs climb, dirt‑cheap fares become harder to sustain.
Demand patterns also shifted. Higher inflation, rising interest rates and economic strain have caused many budget‑conscious travelers to cut back on leisure flying. Research shows even mid‑income people have reduced trips. That contraction hits budget airlines disproportionately because their customer base is more price sensitive. Wealthier travelers who continued to fly often remain tied to legacy carriers through loyalty and credit card perks, and they’re not flocking to no‑frills carriers with weak reputations.
The result is a squeeze on both supply and demand: higher costs and fewer price‑sensitive passengers. Spirit and other low‑cost carriers have been facing mounting financial pressure. The Trump administration has considered a rescue package that might include up to $500 million and a government stake or a push for another airline to buy Spirit — a reversal for an industry once shaped by antitrust fights, like the DOJ’s earlier victory blocking a Spirit‑JetBlue merger.
Opinions differ on whether blocking that merger worsened Spirit’s fate. Some economists say a tie‑up with JetBlue could have stabilized Spirit; others worry consolidation itself has harmed consumers by reducing competitors. What’s clear to several observers is that losing Spirit would likely raise fares on routes where ultra‑low‑cost competition keeps prices down. Even if customers dislike Spirit’s experience, its presence has restrained basic fares industry‑wide.
In short, Spirit’s problems stem from a mix of factors: legacy carriers copying its pricing tactics while using loyalty and scale to win customers, rising fuel and labor costs that erode the ability to offer rock‑bottom fares, and weakening demand among the very consumers its model depends on. The “Dollar General of the skies” found that being the cheapest isn’t enough when larger rivals can match prices on searches and outcompete on loyalty, and when macroeconomic forces squeeze both costs and customers.