U.S. travel is apparently booming.
A recent TSA report showed that the agency screened a record 3.1 million passengers in a single day this June, with Labor Day bringing another historic rush.
On the flip side, the party hasn’t nearly been as fun for the budget crowd. Costs have surged. Case in point, Frontier’s Q2 cost per available seat mile (CASM) jumped 8% to 9.73 cents.
Similarly, Pratt & Whitney engine inspections have sidelined dozens of A320neos across carriers, severely impacting efficiency.
Spirit Airlines (SAVE) has been hit the hardest. Following years of growing losses and sluggish demand on key routes, it filed for bankruptcy again on August 29, its second in under a year. It now finds itself scrambling to restructure and realign.
Now, a fresh bombshell from United Airlines (UAL) CEO Scott Kirby spells even deeper trouble with a remark that, if proven right, may prove to be a death knell for the low-cost pioneer.
United Airlines boss Scott Kirby isn’t mincing words when it comes to his views on budget rival Spirit Airlines.
Speaking at an industry conference, Kirby predicted that the ultra-low-cost carrier will likely go out of business.
When asked why he believed that, Kirby’s reply was cutting: “Because I’m good at math.”
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Spirit filed for bankruptcy in August for the second time, and has had it rough, clawing back market share on the back of weak demand and growing losses.
The airline’s reliance on rock-bottom fares, along with fees for almost everything else, has been subject to a ton of customer frustration. Kirby took aim at that strategy, calling it unsustainable.
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“You can’t have a business model that customers hate. You can’t have a business model predicated on ‘screw the customer,’” he said.
For investors, Kirby’s comments underscore a growing theme that the budget model, which once looked incredibly disruptive, is no longer viable. If Spirit can’t turn things around, consolidation or liquidation will reshape the U.S. airline space.
Spirit Airlines has spent the past year fighting what many consider a losing battle with rising expenses, shrinking liquidity, and a fare/fees model that’s just not pulling its weight.
After emerging from Chapter 11 in March, the company warned on August 12 that it might not be able to continue operating without a massive turnaround.
