How dark is the future of low -cost airlines?
For decades, the budget transport companies successfully displayed cheap flights. But this amazing business model is eroding now as the costs rise and passengers choose more comfortable seats and extension.
It seems that the work cannot even integrate itself from its tail.
Earlier this week, Spirit Airlines (Saveq) again refused to suggest the acquisition of Frontier (ULCC), worth $ 2.16 billion. The offer was similar to the one -boundary boundary earlier this month. The soul was returned, but its offer was rejected.
The first acquisition of Frontier was thwarted in 2022, compared to $ 2.9 billion in cash and shares, at a offer of $ 3.8 billion from Jetblue (JBLU). Spirit submitted a bankruptcy request in November after a federal judge stood up to the Ministry of Justice to prevent it from being linked to Jetblue.
The low -cost carrier model works by providing cheaper seats than traditional airlines for local destinations close to the United States while imposing fees on elements such as specified bags and choosing seats, snacks or drinks. Often times, airlines will use secondary airports with lower landing fees, such as Long Beach Airport in Los Angeles instead of laxation.
But among the increasing competition from traditional transport companies in local roads and high costs of employment and maintenance, the low -cost model slowly.
For example, amid the pressure of the activist investor last year, southwest (LUV) Declare It will end its practice of open seats for decades as part of a new strategy to increase revenues. At the same time, in January, also limits She announced that she will start the show Setter and first -class seat upgrades by late 2025.
Mike Boyd, Aviation Adviser, President of Boyd Group International, said, “
He added: “The model” evaporates. “
Industry prospects do not encourage investors. Jetblue stock Recently fell After expectations at the 2025 airline, with disappointment. Jetblue cited higher costs and less revenues than expected in the results of the fourth quarter.
At the end of last month, the CEO of SouthWest Bob Jordan said that the airline was “suffering from an enlarged cost of the higher unit, the most prominent of which is the market -based wage rates, airport costs, and health care.” Jordan referred to the goal of reducing costs of $ 500 million for the year 2027, which was revealed on the company's investor's day in the last quarter, saying: “We will be unabated in pursuing eating in costs.”
Cost problems in stock prices are reflected: high -cost transport companies, mostly low -cost transportation companies, have been twice the broader Airlines market.
The post Why the model for low-cost airlines may be ‘evaporating’ first appeared on Investorempires.com.