Flashing yellow: What the fall of Spirit Airlines means for cheap flights

Spirit Airlines bankruptcy and potential liquidation doesn’t signify the end of cheap flights, but instead their ubiquity.

A while back I wrote about the high cost of cheap flights. In that post I argued that inexpensive airline tickets have a lot of potential negative consequences, and don’t even necessarily save you money.

A lot of this analysis rested on Spirit Airlines, the “ultra low-cost carrier” (ULCC) that everyone loves to hate. At one point, Spirit had the lowest reviews for customer service, and the highest profitability!

Just look at this Saturday Night Live skit, which ostensibly is about an Alaska Airlines incident, but just wait (or skip) to the end.

But now, the love/hate relationship we have with Spirit—and indeed all ultra low-cost airlines—has become just a hate relationship.

And as recently reported, Spirit Airlines (already in its second bankruptcy of the past few years) is saying it’s in danger of liquidation.

So what happened? Did we all decide that we didn’t like super cheap airfares? Did the whole world read my blog post and decided to eschew flying with Spirit? 😂

Let’s dig in.

Spirit woes

The last few years have not been kind to Spirit.

In late 2024, after a potential merger with Frontier (another ULCC) failed, Spirit filed for bankruptcy. A few months later, it exited bankruptcy, with a plan, but with a plan didn’t seem to make a ton of sense on paper. Unsurprisingly, Spirit filed for bankruptcy a second time a year later.

And now, Bloomberg is reporting that Spirit may undergo liquidation in the next few days.

What happened?

How did Spirit go from being so profitable to being near liquidation? One Mile At A Time, a travel blog, where most of these links are going, had this to say:

Pre-pandemic, Spirit was one of the best margin airlines in the industry. During the pandemic, the industry changed — labor costs went up, and consumer preferences evolved, in favor of premium and long haul travel. Most of the industry profits also come from loyalty programs, which limits the viability of smaller carriers. While Chapter 11 bankruptcy helped Spirit with its immediate debt, it didn’t change the fact that the airline was hemorrhaging money, and had terrible operational losses.

Let’s expand on some of these trends:

• Labor costs growing. The pandemic cause a large labor shortage, and many of those people never came back. There have also been renegotiated union contracts, which increased pay for pilots and other employees. In 2023 alone, labor costs for the major airlines increased by 19%.
• Loyalty programs profiting. These are way more valuable than the airlines themselves. In 2025, American Airlines’ loyalty program made about $2 billion in profit, but the flying part of American Airlines only broke even. As a general rule, airlines that just focus on flying don’t actually make money, and I don’t think people who flew Spirit were really focused on their frequent flier program.
• Consumer preferences changing. Reports show that travelers are buying more premium travel (“Premium Class”), especially as the gap between regular and premium has narrowed. Meanwhile, with everything getting worse for most people, those who are most price sensitive may be not flying at all.

So what does this mean?

I don’t think Spirit Airlines going away is as big of a change that many might think. I think people are still going to search for deals as they can find them.

It’s just that the deals are changing.

Legacy airlines, meaning the big ones like American and Delta, now offer some super cheap Basic Economy fares that, even if not as cheap as Spirit, offer the benefits of a legacy carrier, such as loyalty programs and a network that can handle disruptions (“IRROPS” in the trade).

So there’s less reason to go with a carrier like Spirit.

But also, the very price-conscious are just flying less. With tariffs, fuel costs, and the resulting inflation caused by really colossally stupid moves by our current administration, people are just more squeezed, and have less wiggle room to take trips.

Meanwhile, those who are taking trips are doing so in greater style. Premium Class is now not much more than regular economy, and I’ve seen reports of some short-haul flights where even First Class isn’t much more. That seems huge to me, as I remember First Class being something like ten times as expensive as Coach. Now it’s almost affordable.

End of an era

Since previous potential mergers with Spirit (Frontier, JetBlue) failed, I don’t expect another merger to be proposed. I expect Spirit to fall, if not now, then soon. (They’ve reportedly asked the administration for a bailout. I don’t think that’s going to work.)

Meanwhile, Frontier, the other big ULCC, has recently pivoted away from no-frills to being more like a normal airline, complete with a new loyalty program and adding premium seating to its planes.

It really seems like an end of an era.

Perhaps this was all inevitable. Perhaps the super low-cost model only worked in an era of low interest rates, low labor costs, and reasonably wide economic prosperity.

Or maybe everything old is new again. I for one remember the low-cost airlines Ted and Song that United and Delta (respectively) launched in the early 2000’s.

Maybe in a decade or so, we’ll see another crack at this ultra-low cost model. What is certain is that people will always be shopping for deals, whether it’s in their best interest or not.