US Airlines: Budget Model Falters

Breeze Airways, Frontier, and Avelo are some of the beneficiaries of Spirit's bankruptcy, but the budget airline model remains under stress in the the U.S. and jet fuel prices are not the only reason.

The major airlines such as Delta and United have the scale and clout to out-compete low-cost upstarts with card and rewards programs, and traveler preferences have shifted in recent years from a focus on low fares to premium cabins and services.

Unlike in Europe, U.S. routes are often too long to make low-cost carriers profitable.

With Spirit Airlines gone from the skies, travelers now have fewer lower-cost options waiting in the wings during the busy summer season.

Americans may need to get used to it, as the changes taking place in how we fly could become permanent.

For many years, airline efforts to create loyalty programs that keep customers sticking around could not compete with the one deciding factor for customers when purchasing a ticket: price.

But the era of the low-cost carrier and ultra-low-cost carrier may now be irretrievably broken. "For decades, Americans have been voting with their wallets, showing that what they care about above all else is a cheaper fare," said Kyle Potter, editor of Thrifty Traveler, a travel website and flight deal aggregator.

Potter said the insatiable thirst for low fares is what created low-cost carriers like Spirit, Frontier, and others. "I think Spirit's demise last month signals the start of a new era — maybe, a return to the so-called 'Golden Age' of travel ... and one that many everyday flyers may not like," Potter said.

Recent results from leading carriers back-up Potter's view.

Delta Air Lines' 2025 annual revenue hit an all-time high of $58.3 billion, yet the airline actually sold $1.1 billion less in economy tickets than the year prior.

Premium ticket sales made up the difference, and 60% of Delta's total revenue now comes from higher-margin lines like premium cabins, loyalty programs, and cargo.

Delta CEO Ed Bastian described a classic bifurcation (the so-called "K-shape") of the airline market, with strength in the consumer sector is at the higher end of the curve, while the lower-end consumer is struggling. "Fares are driven by demand and the demand set that is growing the fastest is the premium sector," he told CNBC earlier this year. "There is a limit to how much supply we can put in … our customer is willing to spend what it takes to sit up front," he added.

United Airlines' results tell a similar story, with $3.5 billion in adjusted net profit for 2025 — up 6% — and premium seat revenue jumping 11% for the full year.

It expected record profits this year before war broke out in the Middle East, but has since said that demand remains strong , buoyed by customers who are less price-sensitive. "Costs like jet fuel — but, perhaps more importantly, paying pilots — are too high to justify the lower fares.

Airlines need scale in order to truly compete," Potter said.

It's a chicken-or-egg scenario for would-be Spirits.

Jet fuel has put a big squeeze on all carriers in 2026, and hit smaller ones that don't have the scale harder.

U.S. carriers spent 56.4% more on jet fuel in March than in February, according to data from the Department of Transportation released last month.

They spent a total of $5.06 billion on fuel in March, up from $3.23 billion in February, and 30% more than what they paid in March 2025.

The situation with the Strait of Hormuz can cause jet fuel prices to rise or fall rapidly.

An apparent deal reached between the U.S. and Iran to reopen the strait pushed prices lower this week, and prices have been trending down since their April peak.

But for many LCC carriers the damage to their bottom line this year has already been done, and Iranian officials said on Saturday that the strait had been closed again. "You need scale in order to compete, but to compete, you need scale," Potter said, noting that the Big Three airlines — American, Delta and United especially — have used their scale and their lucrative loyalty and credit card programs to muscle out smaller carriers.

That leaves the existing LCCs to scrounge around for airports that aren't as coveted by the big airlines.

If you want to fly to Boise or depart Traverse City, you might score a cheap seat (of course, cheap can be a very subjective term). "Allegiant, Breeze, and Avelo have found a lane by flying between smaller second- and third-tier cities where the big guys just aren't really bothered.

If one of them tries to grow to be nationally relevant, you can bet the Big Three will bring the hammer down," Potter said.

Airlines have been scrambling since Spirit's demise to realign to the landscape.

Southwest, the Dallas-based carrier long known for its no-assigned-seats model ( that model ended early this year ), pulled out of O'Hare International Airport this month and is consolidating all its flights at Midway.

JetBlue, the New York-based airline that markets itself as a premium low-cost carrier, is ceasing service to the Manchester, New Hampshire market (which the airline billed as Manchester-Boston) on July 7.

It is also planning to double down on its Ft.

Lauderdale exposure , while reducing flights at New York City's LaGuardia and New Jersey's Newark airport, CNBC reported this week.

Scott Schaefer, chair of the Economics Department at the University of Utah's David Eccles School of Business, said the remaining low-cost carriers will have trouble filling Spirit's void. "The challenge is that in a high-fuel-cost environment, the number of routes that can be profitable is smaller than it was prior to the Iran war.

This means that Allegiant and Breeze won't be filling all the holes left by Spirit anytime soon," Schaefer said.

The void being filled is not a very large one, either, Schaefer said, noting that only 2 percent of the flying public chose Spirit.

For its part, Salt Lake City-based Breeze Airways, a startup carrier founded in 2021 by JetBlue founder David Neeleman, s