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United CEO's Grim Forecast–Low-Cost Carriers on Brink, Spirit Airlines Doomed?

randycupertino 2y ago
> "Kirby laid out Delta, United, and Alaska as equally profitable – he adjusts the numbers to get there – American as break-even and then everyone else as money-losing even without recession... > "And he says Spirit Airlines could be going out of business: > [T]he low-cost carriers are just a disaster. These are going-out-of-business numbers for a number of these airlines. You look at Spirit Airlines for example at -30%. That’s a number that is hard to put in context. But if you thought about that at United, if we had a -30% margin, it would mean we actually lose $4.5 billion in a single quarter."
ggm 2y ago
We've just had 2 LCCs, (one a regional with significant government support) crash out in Australia. It's a de-facto 2 majors duopoly in Australia with one (Jetstar) sidekick LCC. (it may be unfair to characterise REX as an LCC. Bonza definitely was) At some level, for some economies, flying is wider-public-interest stuff which demands regulation. We're a bit half-pregnant when it comes to the management of slots, costs, compliance. I hate LCC. I realize they suit some people, the ones who will willingly wear every item of clothing so as not to incur wrath for putting a bag into the overhead locker, in fear of incurring costs to put it in the hold. If you add all the optionals back into price, the LCC is usually no cheaper than a mainline so it really only "wins" for people who don't carry things with them when they fly. The one good thing of the LCC I've used, has been non-reclining seats. Ending the warfare over space was good, if harsh. I suppose the "paint your wagon" wash out interior is good too.
dangus 2y ago
There's a great Modern MBA YouTube video on this very subject: https://www.youtube.com/watch?v=rslcr774JXM https://www.youtube.com/watch?v=rslcr774JXM Legacy airlines have done a fantastic job responding to the threat of low-cost airlines, at least in the US. I think that most of low cost airlines' business tactics are easily reproduced by larger carriers, and as low cost airlines scale up they face extremely similar cost structures as legacy airlines. If you really want the Spirit Airlines experience you can get yourself a Basic Economy product and end up with a very similar product and price point but with a much more reliable service and robust route network. Obviously, Kirby's analaysis is highly biased but that's why I recommend Modern MBA's take as an alternative.

> "Kirby laid out Delta, United, and Alaska as equally profitable – he adjusts the numbers to get there – American as break-even and then everyone else as money-losing even without recession... > "And he says Spirit Airlines could be going out of business: > [T]he low-cost carriers are just a disaster. These are going-out-of-business numbers for a number of these airlines. You look at Spirit Airlines for example at -30%. That’s a number that is hard to put in context. But if you thought about that at United, if we had a -30% margin, it would mean we actually lose $4.5 billion in a single quarter."

ggm 2y ago

We've just had 2 LCCs, (one a regional with significant government support) crash out in Australia. It's a de-facto 2 majors duopoly in Australia with one (Jetstar) sidekick LCC. (it may be unfair to characterise REX as an LCC. Bonza definitely was) At some level, for some economies, flying is wider-public-interest stuff which demands regulation. We're a bit half-pregnant when it comes to the management of slots, costs, compliance. I hate LCC. I realize they suit some people, the ones who will willingly wear every item of clothing so as not to incur wrath for putting a bag into the overhead locker, in fear of incurring costs to put it in the hold. If you add all the optionals back into price, the LCC is usually no cheaper than a mainline so it really only "wins" for people who don't carry things with them when they fly. The one good thing of the LCC I've used, has been non-reclining seats. Ending the warfare over space was good, if harsh. I suppose the "paint your wagon" wash out interior is good too.

dangus 2y ago

There's a great Modern MBA YouTube video on this very subject: https://www.youtube.com/watch?v=rslcr774JXM https://www.youtube.com/watch?v=rslcr774JXM Legacy airlines have done a fantastic job responding to the threat of low-cost airlines, at least in the US. I think that most of low cost airlines' business tactics are easily reproduced by larger carriers, and as low cost airlines scale up they face extremely similar cost structures as legacy airlines. If you really want the Spirit Airlines experience you can get yourself a Basic Economy product and end up with a very similar product and price point but with a much more reliable service and robust route network. Obviously, Kirby's analaysis is highly biased but that's why I recommend Modern MBA's take as an alternative.