Costs Increasing while Profit Margins Decrease for Ultra-Low-Cost-Carriers
When the airlines looked towards a post-pandemic recovery, many were betting that the ultra-low-cost-carriers would win over the flying public first with their “debundled fares” presenting a lower cost for airlines before add-ons including carry-on luggage and seat selection. On the contrary, two of the biggest discount airlines appear to be faring worse this year.
Numbers reviewed by Reuters from numerous sources show while non-operating fuel costs are on the rise, the discount airlines have been hurt the worst. While those costs have been relatively flat for the legacy carriers, non-fuel operating costs as a percentage of revenue increased by 10% for Spirit and 6% at Frontier.
Making things worse for the two carriers are shrinking profit margins. The legacy carriers are increasing their adjusted pre-tax margins compared to before the pandemic, while the ultra-low-cost-carriers have decreased incredibly. Spirit’s margins are down to 2.9%, while Frontier only has a 9.1% margin.
The new data comes at a tumultuous time for both carriers. In comments at a major financial conference, Frontier chief executive Barry Biffle blamed the lack of business travel and “lazy” workers who choose to do their jobs from home as part of the downturn. Meanwhile, Spirit is tied up with a contentious merger with JetBlue, which could allegedly spike airfare prices of the ultra-low-cost-carrier.
However, the change in customer behavior may not necessarily be a bad thing for consumers. Sun Country Airlines is reportedly considering adding more amenities for flyers, including branded airport lounges and in-air refreshments.
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Source: frugal travel guy