Travel boom not enough to drive profits at US budget airlines Frontier, Spirit
By Rajesh Kumar Singh
CHICAGO (Reuters) — Travel boom has delivered bumper earnings for U.S. carriers, but no-frills airlines such as Frontier and Spirit are struggling to return to sustainable profitability.
That has made some of them weigh premium-price offerings, including first-class seats, customer lounges and branded foods even as they expect fares to remain the primary driver for bookings.
Ultra low-cost carriers offer a no-frills experience at rock-bottom fares and charge heavily for ancillary services.
They were tipped to be the big winners after the pandemic, but persistent operational constraints have exacerbated their cost pressures, making it imperative to find new high-margin revenue streams.
With consumers more willing to splurge on travel, demand for premium cabins has gone up. This together with soaring bookings for flights to Europe and Asia have allowed the legacy airlines — Delta, United and American — to mitigate inflationary pressures.
Budget carriers lack these products.
Frontier CEO Barry Biffle said while he will not invest in long-haul jets, he has been struck by a greater desire among leisure travelers to pay for first-class seats on domestic flights.
Frontier is watching the trend «very carefully» and would consider adding premium seats if it lasts for multiple years, he said.
«If people are really willing to pay that much for a premium, maybe there is an opportunity,» Biffle told Reuters.
Similarly, Minneapolis-based ultra-low-cost carrier Sun Country is contemplating opening an airport lounge and offering branded food and beverage. CEO Jude Bricker said the demand for services that offer even minor improvements to the travel experience has doubled.
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