From the Air Spirit warning to the latest Wizz Air policies, the signs of a direction change are more than obvious, writes IL Corriere della Sera, taken by Rador Radio Romania.
Wizz Air withdraws from the Persian Gulf market. The Play Airlines company in Iceland is abandoning the transatlantic market to focus on some destinations of the European coast. Norse Atlantic Airways in Norway is increasingly lending its aircraft to other airlines.
After more than half a century, Southwest Airlines, a historic company, give up the random (and free) allocation of places. Indigo, an increasing Indian company, extends to intercontinental flights and adds a “premium” class. And the American airline Spirit draws an alarm signal on liquidity risks of the coming months.
“The low-cost model is dead”
2025 seems to be a turning year for the (ultra) low-cost model in air transport. The big airlines – such as Ryanair and Easyjet – are currently confirmed. But many others face different degrees of difficulty and try to relaunch.
“The low-cost model is dead. It is a terrible model. I'm sorry to say that,” said Scott Kirby, CEO of United Airlines, a company that currently registers significant profits, especially due to customers who make business class.
Have grown so much that they need loyal customers
“The low-cost model was: to deceive the client, to deceive people, to convince them to buy and then to charge them a lot of additional taxes they did not expect, with hidden information behind an incomprehensible legal language,” Kirby criticized on the occasion of the “Future of all things” organized by Wall Street.
According to the director of United, although this approach to low-cost carriers “may have worked in the past for some airlines, their problem is that they have grown enough to need loyal customers.”
The “trophic chain” of the industry
Last summer, Ed Bastian, CEO of the Delta Air Lines, another airline that has since the pandema has registered a rapid growth of business, said the low-cost model if it used a more diplomatic language.
“You cannot continue to record losses if you are at the base of the industry's trophic chain,” he said. “The airlines that cannot reach the profitability threshold will not have the opportunity to continue operating the current business models,” he added.
The General Manager of United accuses: “The low-cost model is based on people's scam.”
From European airlines Wizz Air, Play and Norse Atlantic to American Airlines Spirit and Southwest, what is happening in the low-cost aeronautical field?
Traditional carriers put pressure by lowering prices
According to experts, traditional carriers are those who put pressure on many low-cost airlines. On the routes where they compete directly with the simple carriers, they actually equalized their tariffs, even “stripping” their tickets from the anterior facilities (such as hand luggage).
Customers of Airlines Spirit, Frontier and Southwest are very priced sensitive.
If the rates of low-cost carriers approach too much to those of Delta, United or American, the experts continue, the main competitive advantage is lost.
A growing presence
After years of constant growth, the model goes through a transition phase. According to the data of the specialized company Cirium, in 2024, one in three places on the world flights was offered by low-cost airlines.
According to the OAG platform, from 741 airlines questioned, 114 are classified as “without pretensions”. And among the first ten large airlines in the world, four are low-cost airlines (Southwest, Ryanair, Indigo, Easyjet).
Since 2019, low-cost airlines have increased their global supply quota by 13%, while traditional airlines have not yet been able to return to the levels before the Covid-19 Pandemic.
Change of model
From a financial point of view, for low-cost airlines things do not look very good.
Last autumn, under pressure – including media – some investors like Elliott Investment Management, Southwest was forced to review their business model, levies for some previously free services, such as choosing places.
Play, which also operates flights between Iceland and the US, has interrupted the races to restructure and survive, focusing more on European routes. In the first six months of this year, he registered losses of $ 42.1 million, and on June 30 he had only $ 11.9 million in cash.
Changes operated by Wizz Air
In recent days, after almost five years, Wizz Air has closed his branch in Abu Dhabi because he has never been able to generate profits from aircraft in the United Arab Emirates.
At the same time, the Hungarian airline has reduced its plans, drastically reducing the A321xLR Airbus commands (a single corridor capable of intercontinental flights) returning to its roots, focusing more on Eastern Europe and increasing flights to markets where there are possibilities of extension, as it is.
What happened on the US market
Southwest Airlines, which closed its accounts at a loss only because of the pandemic, in the first half of this year registered a dramatic decrease in operational profit, declaring only $ 2 million (from $ 6 million in 2024).
And a few days ago, the Spirit Bomb appeared. The Ultra-Low-cost airline-ridiculed in the US for its services considered questionable-has launched, through a statement, an alarm signal on its “future solvency”.
“Liquidity risk”
Spirit said that the results do not improve quickly enough to meet the liquidity requirements of the creditors. Therefore, the company takes into account the possibility of selling aircraft, or other assets to collect cash and negotiate with some creditors.
The airline based in Florida, known for its yellow aircraft, will dismiss 270 pilots (of about 3,000), while another 140 will be relegated from the rank of captain to the first officers.
If these measures fail, Spirit warned that “there are serious doubts about the ability of the airline to continue to operate in the next 12 months.”
Premium Product Offer
In order to increase the income, the airline has introduced more “traditional” services, such as premium places aboard its aircraft, tariff packages comparable to those of major airlines and a premium economic class with additional foot space.
But it wasn't enough. In the three months ended on June 30 this year, the airline – which operates a fleet of 45 aircraft, all Airbus – reported a loss of 184 million euros.
Impact on ticket prices
Fitzgerald has warned that the bankruptcy of Spirit will increase the average rates. In short, consumers will get to pay more.
“We analyzed the performance of the internal medium-sized average tariffs for five Denver routes that spirit completely abandoned from the second quarter of 2024 (Los Angeles, Las Vegas, Houston, Miami, Fort Lauderdale),” the analyst wrote.
“The data show that in the four quarters that followed the spirit from the market, the basic average rates increased by 5.7% compared to the previous year.”
Photo: © Kateryna Sheviakova | Dreamstime.com
