Are America's Low-Cost Airlines In Trouble? A Deep Dive Into Their Struggles

America's low-cost airlines are in a tailspin as they grapple with low profits and rising costs impacting travelers. After the coronavirus pandemic, which halted most domestic and international air travel, America's low-cost carriers have struggled to recover. Spirit Airlines announced losses of $159 million in the second quarter of this year and is now exploring Chapter 11 bankruptcy options, according to a recent report by the Wall Street Journal. Southwest, the world's fourth largest airline, announced in July that its profits had fallen by 46 percent in the year's second quarter.

JetBlue and Spirit have failed to turn a profit since before the pandemic. "The U.S. is one of the largest domestic airline markets in the world and is unique on many fronts," AirlineGeeks founder Ryan Ewing told Newsweek. "Even as demand has bounced back post-pandemic, these carriers will certainly need to remain nimble." Newsweek reached out to JetBlue, Spirit, and Southwest for comment via email.

Why Are Airlines Struggling?

Despite record passenger numbers this year, airlines struggle to mitigate higher costs, such as fuel, wages, and interest rates. "Low-cost and ultra-low-cost carriers like Spirit have been left extremely vulnerable to increasingly volatile costs," Ewing said. "By some estimates, labor costs have increased by over 20 percent compared to pre-pandemic levels, and of course, inflation and other supply chain woes are also a factor here."

According to AviTrader, fuel spending across the global airline industry is projected to hit $291 billion in 2024, a $100 billion increase from five years ago in 2019. Russia's war with Ukraine and ongoing unrest between Israel, Palestine, Lebanon, and Iran show minimal signs of ending anytime soon, meaning that prices are likely to continue rising into 2025.

Some airlines have already announced changes to their services in the face of dropping profits, most of which are route cuts. Southwest announced earlier this year that it will exit four airports: Bellingham International Airport in Washington, Cozumel International Airport in Quintana Roo, Mexico, George Bush Intercontinental Airport in Houston, and Syracuse Hancock International Airport in New York.

In June, JetBlue stopped serving Bogotá, Colombia, Quito, Ecuador, Lima, Peru, and Kansas City. In a statement to Newsweek, JetBlue said it has "various network adjustments refocusing on the airline's core strengths (including adding 20 percent more seats in New England this winter) and new premium offerings such as announcing our first airport lounges coming to our New York and Boston focus cities. We've also enacted a multi-year reliability initiative that has shown positive early progress."

Learning From Europe

While the skies may be dark for America's budget airlines, things are looking considerably brighter in Europe. Ireland's Ryanair has recovered well from profit losses during the pandemic, with a 34 percent profit rise reported in the year to May 2024. After three consecutive years of losses, Hungary's Wizz Air boasted a 30.2 percent profit boost in March this year.

"To help their situation, US budget airlines could take a lesson from their EU and U.K. counterparts like easyJet, Wizz, and Ryanair, who are thriving despite economic conditions," Anton Radchenko, CEO of Boston-based AirAdvisor, told Newsweek. "These EU and U.K. low-cost airlines have really mastered the business model with more operational efficiency, cost control, and by maximizing ancillary revenues—something U.S. low-cost carriers could do more of."

Radchenko explains that Europe's budget carriers "unbundle" their services, meaning purchasable elements like baggage, seat selection, and speedy boarding are treated as paid-for add-ons when booking. Some airlines even charge for printing boarding passes and check-in fees for those who don't do so online before a flight. While some American providers do this, it is a much more regular occurrence across European airlines.

Some low-cost carriers in the U.S. do this as well, but not to the same degree. It might not be popular with American passengers at first, but digitizing more of the traditional in-person customer services can also drive down costs. Also, budget carriers in the EU and U.K. get the most out of their aircraft with super fast turnaround times. They also tend to standardize their fleets, which can reduce the time and money used with a more diverse stable of planes. If U.S. budget carriers did this and focused more on using secondary airports and point-to-point service, they could reduce some operational costs.

Are you a frequent flyer who has been impacted by problems with budget airlines? Have your regular routes been canceled? Email a.higham@newsweek.com.