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New York Post
Low-cost airlines Spirit, Frontier ‘going out of business’ over poor customer service, United CEO says
By Ariel Zilber,
2024-06-06
United Airlines CEO Scott Kirby said struggling no-frills rivals such as Spirit and Frontier are on a path to “going out of business” because of their poor customer service .
The outspoken Kirby called out the airlines for their “flawed business model” — which draws passengers with ultra-low fares and then slaps them with charges for oversized carry-on bags that are sometimes higher than the plane ticket.
United’s no-frills fares, like those of its low-cost rivals, include no carry-on fee. Passengers who buy them are not permitted to change the ticket or cancel.
Spirit recently dropped all change and cancellation fees while Frontier dropped fees for all non-basic economy fares.
United is the fourth-largest domestic US carrier behind America, Delta and Southwest. REUTERS
Earlier this year, Spirit CEO Ted Christie said the airline industry in the US was a “rigged game” designed to benefit the “Big Four” — United, Delta, American and Southwest — while “the long-term losers” were American flyers.
“Today, nearly all the profits of the entire US airline industry are concentrated in just two companies, while the smaller non-legacy carriers scrambled to restore profitability in what seems ever more like a rigged game,” Christie said in an earnings call with analysts.
Frontier, the Denver-based ultra-low-cost carrier, has failed to report a profit in three of the last four quarters despite a travel boom.
Frontier’s struggles, along with some other discount carriers such as Spirit, has some analysts raising questions about their business model.
Kirby said that companies like Spirit Airlines have not always treated customers right. Getty Images
Frontier’s shares have fallen 32% since early March. Last year, the company’s stock lost 47% of its value.
Biffle pinned the blame on excess industry capacity in key leisure markets that has depressed airfares.
Frontier’s fare revenue per passenger fell 22% in 2023 from the previous year.
Spirit forecast a loss in the second quarter as its earnings continue to reel from the grounding of a number of its aircraft as well as bloated industry capacity in key markets.
Since Jan. 1, Spirit shares have fallen by more than 75%. Earlier this year, a federal judge blocked a $3.8 billion merger with JetBlue.
Last year, Frontier Airlines’ stock price fell by 47%. AP
Spirit’s inability to make money in an era of high demand for travel has raised questions about its ability to manage debt that is due to mature in 2025 and 2026.
The company said it has had “constructive” discussions with its bond holders and is aiming to have a resolution this summer.
Like Frontier, Spirit’s earnings are also hurting due to excess capacity in key markets, forcing the airline to discount heavily to fill planes.
Average fare per passenger was down 16% in the first quarter from a year earlier.
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