How the collapse of Spirit Airlines is impacting travelers and the wider aviation industry

Amna Nawaz:

Spirit Airlines has officially shut down. The low-cost airline went out of business this weekend after 34 years. It's left members of the flying public in a tricky bind and the larger industry with some serious questions.

Stephanie Sy has our look at how we got here and what comes next for consumers.

Stephanie Sy:

Amna, on Saturday, the low-cost air carrier canceled all flights and announced customer service was no longer available; 17,000 jobs are impacted and passengers are struggling with how to go about their scheduled travel, leaving many stranded.

Nonyae McPherson, Stranded Passenger:

It's unfortunate. And they definitely do need to be sued, because people pay their money to be able to go where they want to go. And for you to cancel and not have no type of, like, backup resources for them or another way for them to get to where they need to go was kind of -- like, that's messed up.

Jenitzel Granados, Stranded Passenger:

We got our flight canceled two times. First time was yesterday, and then they said to rebook the flight over again. And then we did, rebooked it, but then, this morning, when we got here, They was like, oh, we canceled all the flights because Spirit is shutting down.

Cathy Sanchez, Stranded Passenger:

And when we get here, there was a guy so calm posting some signs saying that Spirit ain't working no more. So what are we going to do? There was ladies with kids on the floor.

Stephanie Sy:

All of this comes as jet fuel prices continue to soar due to the U.S. war with Iran. It was not the only factor that contributed to Spirit's closure, but it was an important one.

For a closer look, I'm joined by Nick Ewen, editor in chief of The Points Guy.

Nick, thank you for joining the "News Hour."

So, you heard from those frustrated air travelers. What is happening now for them who were stranded over the weekend and for people who have booked flights with Spirit in the next few weeks?

Nick Ewen:

Yes, if you were stranded or you do have a flight coming up, Spirit has said that they are going to automatically refund everyone who paid with a credit card or a debit card. But, of course, that is only going to make you whole financially.

Now you have to figure out what's going to happen with my vacation or how do I get back from where I just traveled to? Many other airlines are offering discounted fares or fare caps on routes that Spirit operated. So I definitely recommend exploring all of those options, calling airlines directly to see what they might be able to offer.

But start online and act quickly because some of these discounts are only for a limited time, only apply to select routes. So you definitely want to try to investigate before those discounted seats are all snapped up.

Stephanie Sy:

It was interesting, Nick, to see how major airlines, including Delta, Frontier and American, almost immediately started offering these discounted tickets to those passengers that were left in limbo on Saturday. Are these airlines seeing this as a growth opportunity?

Nick Ewen:

I definitely think some airlines are looking at it in that exact way.

We saw JetBlue, for example, which has a large presence at Fort Lauderdale International Airport here in Florida. They immediately announced a number of new routes. I expect that other airlines are going to potentially look to step in and fill that void.

We have heard reports of people who had elite status with Spirit getting status matched or the ability to match their status with other airlines. So there definitely is a potential opportunity here. This does come at a cost, because Spirit was a low-cost airline. They typically drove the prices down in the markets where they operated.

Unfortunately, we do expect fares to rise now because Spirit is no longer able to exert that downward pressure on fares.

Stephanie Sy:

As abrupt as the closure seemed, this had been sort of years in the making, multiple bankruptcies, et cetera.

Spirit said in its announcement this weekend that the sudden and sustained rise in fuel prices in recent weeks left them with no alternative, Nick. But, all weekend, we also heard the Trump administration blame the Biden administration for blocking that JetBlue-Spirit merger from a few years ago.

What's the truth?

Nick Ewen:

Yes, the truth is somewhere in the middle.

The jet fuel crisis definitely was the proverbial straw that broke the camel's back in this instance. But Spirit had many issues dating back years, really coming out of the pandemic. They were unable to really return to profitability. They struggled with some high costs for engine issues, leasing costs, and then the jet fuel, which typically makes up about a third of an airline's expenses.

It's their second largest expense item behind labor. But the big issue is that Spirit was really struggling to chart a path forward to be financially successful. And even if they had merged with JetBlue, they were being absorbed into JetBlue. So Spirit would not have existed in the way that it still was until last week.

So a lot of factors, not one in particular, but it definitely was the jet fuel piece that ultimately, I think, accelerated their inability to operate.

Stephanie Sy:

It seems like this is happening at a particularly tough time for air travelers. We're already facing the prospect of rising ticket prices ahead of our summer vacations.

Especially for budget travelers, Nick, what options are left and are their business models more sustainable than Spirit's?

Nick Ewen:

It's a great question.

We do still have some other discount carriers, Frontier Airlines, Allegiant here in the U.S. There are many abroad as well.

I would say that those airlines are a little bit more at risk if this jet fuel crisis does sustain for many more months to come, simply because consumers are so price-conscious when they're looking at these budget airlines. And they're more likely to be too sensitive to price changes.

Airlines have to pass along these costs somewhere. They want to minimize them as much as they can because of how elastic demand is for airline tickets. Where the price increases, demand typically drops. So airlines are going to be really cautious.

But if you have not booked your summer travel yet, now is the time to do so, because, unfortunately, we don't see this changing any time soon. And even if the Strait of Hormuz opened today, we'd be talking weeks, if not months, before we see any relief in the form of lower ticket prices.

Stephanie Sy:

Nick Ewen, editor in chief of The Points Guy, joining us.

Thank you, Nick.

Nick Ewen:

Of course. Thanks for having me on.