Spirit Airlines and the future of cheap flights

Summary

Planet Money: "Spirit Airlines and the Future of Cheap Flights" (April 29, 2026)

Episode Overview

This episode dives deep into the rise and fall of Spirit Airlines, America's infamous ultra-low-cost carrier, and examines what Spirit’s story reveals about the future of cheap air travel. The Planet Money team revisits key moments in Spirit’s history, interviews its former CEO Ben Baldanza, and unpacks the economic forces that have pushed Spirit — and the low-fare airline business model — to the brink of collapse. Along the way, the hosts explore how legacy airlines fought back, why budget airlines are struggling today, and what the possible government bailout means for consumers.

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Key Discussion Points & Insights

1. Spirit's Turbulent Present (00:16 – 02:28)

• Current Crisis: After filing for bankruptcy for a second time, Spirit faces possible liquidation.

• On-the-Ground Anxiety: Host Greg Rosalski recalls checking his Spirit flight status obsessively, reflecting passenger uncertainty and news of staff layoffs.

• Industry Joke: The uncertainty around Spirit’s future made for gallows humor among both staff and passengers.

  "They were like, oh, you're flying with Spirit... I guess I'm one of the last." — Greg Rosalski, (01:09)

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2. Spirit’s Meteoric Rise and the “Dollar Store” Airline (03:31 – 14:05)

Early 2010s: Growth Amidst Controversy

• Fastest-Growing, Most-Hated: Spirit was both booming in size and bottom-ranked in customer satisfaction.

Experiencing Spirit (03:43 – 05:41)

• Zoe Chase and Jacob Goldstein recount their $68 flight to Florida; amused (and annoyed) at the ubiquitous á la carte fees:

  • $30 to pick a seat.
  • $3 for water.
  • $50 for a carry-on.

• Zero frills: ads on overhead bins and tray tables, tightly packed seats that don’t recline.

  "Spirit Airlines is a subway car in the sky." — Jacob Goldstein, (04:27)

  "This is the first time we've used Spirit and it's going to be the last time we use Spirit." — Zoe Chase, (05:10)

Ben Baldanza’s Radical Vision (06:20 – 12:51)

• Self-Identification: Baldanza compares Spirit to “Dollar General,” emphasizing radical cheapness over comfort.

  "We're Dollar General, that's who we are. We're not even Walmart. We're Dollar General. And we like being Dollar General because we save people lots of money." — Ben Baldanza, (06:49)

• Relentless Cost-Cutting: Even Baldanza's office has a single light bulb on to save money.

• Baldanza on Airline Norms: Most airlines chase higher-paying customers and offer “service.” Spirit only sells the core product: the seat, the ride. Everything else is extra.

  "Spirit serving you as a valued customer is letting you fly to New York for $69 when everybody else is charging 150... We'll let the 7-Eleven be available to you while you're in the airplane." — Ben Baldanza, (10:26)

• Ads Everywhere: Spirit monetizes every possible surface to lower fares even further.

• Customer Backlash: Spirit routinely ranked last in customer experience surveys, but Baldanza criticizes such surveys for not considering price, likening it to comparing Mercedes to a Ford Focus (11:50).

  "If you go into the dollar store and you're expecting to buy a nice three-piece suit, you're gonna be really disappointed. No one should come to Spirit and complain. We don't have legroom. We're not a store that sells legroom." — Ben Baldanza, (12:51)

Who Flies Spirit? (13:20 – 15:40)

• Two archetypes: customers who hate it and never return, and those who understand and accept Spirit’s trade-offs.

• The “conflicted” flier: knows it will be unpleasant, but the low price keeps them coming back.

  "I hate them... Well, they're so cheap." — Anecdote relayed by Ben Baldanza, (14:29) Economists call this the difference between "stated preferences" (what people say) and "revealed preferences" (what they actually do). — (15:00)

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3. Spirit's Fall: The Revenge of Legacy Carriers & Financial Squeeze (17:12 – 24:42)

The Legacy Airline Fightback (19:17 – 22:59)

Factor 1: Copying Spirit’s Playbook

• Basic Economy: Delta, American, and United mimic Spirit by offering cheaper, no-frills fares, pulling budget travelers back to their networks.

  "The legacy airlines, they look at Spirit and other budget airlines and clearly they're eating their lunch...So Delta and American and United, they also start throwing creature comforts out the window for passengers not willing to pay for them." — Greg Rosalski, (19:43)

• These airlines offer similar pricing but with bigger route networks and more flexibility.

Factor 2: Supercharged Loyalty Programs

• Legacy carriers beef up rewards, make elite status more enticing, and leverage scale, making it difficult for smaller carriers to compete.

  "Loyalty programs play a huge role in allowing airlines...to leverage their network size in ways that have nothing to do with actually offering higher quality service." — Severin Borenstein, via Zoe Chase, (22:27)

Factor 3: The Economy Turns Against Budget Flyers

• Inflation, high energy and labor costs, and a restricted pool of budget-conscious flyers hit Spirit the hardest. Even consumers earning up to $150,000 are flying less or cutting out air travel.

  "Budget airlines historically appealed to customers with limited income. And in our research we have seen travelers who earn up to $150,000 a year saying they have cut back on their leisure travel." — Greg Rosalski, (24:03)

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4. The Specter of Government Bailout (17:44 – 19:02, 25:08 – 25:51)

• Spirit requests a federal bailout worth up to $500 million; discussion of possible government ownership stake.

• Parallel drawn to other recent government interventions in private business (e.g., U.S. Steel).

• Debate: Is this capitalism, or something new?

• Irony: Just a few years ago, the government blocked a Spirit–JetBlue merger; now, Spirit’s failure could reduce competition and raise fares system-wide.

  "If Spirit were to die, that would likely put less pressure on the big airlines. So yeah, Spirit may be hated, but a world without it would probably be bad for a lot of passengers, even those who don't like flying with them." — Greg Rosalski, (25:36)

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Notable Quotes & Memorable Moments

• On Spirit’s “No-Frills” Identity:

  "I spent over 20 years in what people think of as the traditional airline business...I would go to bed at night thinking, how can I get you to pay more for your ticket?...[Now,] we charge separately for checked bags and for large carry on bags." — Ben Baldanza, (07:46, 08:46)

• On Customer Satisfaction:

  "Spirit Airlines received one of the lowest overall scores for any company we've ever rated." — Zoe Chase reading Consumer Reports, (11:44)

• On the Irony of Choice:

  "We pick the cheap option and then we feel kind of dirty about it. We say we'll never do it again, even though we know deep down we probably will." — Zoe Chase, (15:50)

• On Market Fallout:

  "A world without [Spirit] would probably be bad for a lot of passengers, even those who don't like flying with them." — Greg Rosalski, (25:36)

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Timestamps for Key Segments

• Spirit’s Precarious Present and Bankruptcy News: 00:16 – 02:28
• Spirit in Its Heyday: First-hand Flight Experience: 03:31 – 05:41
• Ben Baldanza Interview: The Making of Ultra-Low-Cost Airline: 06:20 – 15:00
• Economics of Airline Preferences: 15:00 – 16:01
• Spirit's Collapse: Legacy Airlines Strike Back: 17:12 – 22:59
• Budget Flyers Squeezed by the Economy: 22:59 – 24:42
• The Bailout Conversation / Competition’s Future: 25:08 – 25:51

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Conclusion & Reflection

Spirit’s journey from industry disruptor to bankruptcy case highlights the complex interplay between business model innovation (ultra-low-cost), consumer behavior, market competition, and macroeconomic headwinds. While many might loathe flying Spirit, its cut-throat pricing pressured the whole industry to offer cheaper fares — and its possible demise raises the question of whether flying will soon become less affordable for everyone.

“Spirit may be hated, but a world without it would probably be bad for a lot of passengers, even those who don’t like flying with them.” (25:36)

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For further reading, check out Greg Rosalski’s Planet Money newsletter and related episodes on the history of budget airlines at npr.org/planetmoney.

Transcript

[Sponsor/Advertiser]

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[Emma Peaslee]

This is Planet Money from NPR. About a month ago, R and Darling booked a ticket with Spirit Airlines for a work event in New York City. And if you've been following the news about Spirit, you know that Arin was not feeling great about that decision.

[Greg Rosalski]

I just started checking the flight status every two hours and I did that

[Ben Baldanza]

for like 72 hours straight because after

[Emma Peaslee]

filing for bankruptcy for a second time, Spirit is having even more financial issues. Now. It looked like it was about to go into liquidation and could maybe disappear forever.

[Ben Baldanza]

And I would even call them and be like, hey, is there something? Cause I got a little worried that

[Greg Rosalski]

whoever was like in charge of updating

[Ben Baldanza]

the flight status, maybe they were even

[Greg Rosalski]

like, you know, let go.

[Emma Peaslee]

When the day of his flight finally came, his departure was sort of a running joke with the staff at the airport.

[Ben Baldanza]

They were like, oh, you're flying with Spirit.

[Zoe Chase]

And I was like, kind of looked

[Greg Rosalski]

at him and I'm like, I mean,

[Ben Baldanza]

I guess I'm one of the last.

[Emma Peaslee]

Arin did make it to his destination, but Spirit's fate is a little more up in the air. Hello and welcome to Planet Money. I'm Emma Peaslee. Spirit used to be the king of ultra low cost carriers. They're notorious for low fares and charging for basically everything else. And while maybe they weren't the most beloved airline, for a time, they were the fastest growing. Now the question is, can Spirit make it through a week? Today on the show, what happened to Spirit? First, the rise. We'll go back to 2014 when the budget airline was flying high. We'll talk with then CEO Ben Baldanza about his radical vision for cheap air travel. And we'll take an uncomfortable trip of our own. Then the no side how legacy airlines beat Spirit at their own game and sent many budget airlines into a tailspin. Just last week the federal government said it may step in to bail out the budget airline.

[Ben Baldanza]

I think we just buy it.

[Zoe Chase]

We'd be getting it virtually debt free.

[Ben Baldanza]

They have some good aircraft that could assets and when the price of oil

[Zoe Chase]

goes down, we'll sell it for a profit.

[Ben Baldanza]

I'd love to be able to save those jobs.

[Sponsor/Advertiser]

Support for this podcast and the following message come from E Trade from Morgan Stanley. Simplify your finances and discover the convenience of investing in banking all in one place. Plus get up to $1,500 when you open a brokerage account with a qualifying deposit today. Learn [e-mail] offer banking products and services are provided by Morgan Stanley Private Bank, national association member fdic. Terms and other fees apply. Investing involves risks. Morgan Stanley Smith Barney, llc Member SIPIC

[Ben Baldanza]

Every day, NPR reports stories that keep you informed without fear or favor. That's the promise of a free press in a democracy. It's in the First Amendment. I'm Tom Bowman and I cover the Pentagon for npr. Stand up for independent news coverage today by donating early for public media giving days coming up on May 1st and 2nd. Give now at donate.NPR.org Back in 2014,

[Emma Peaslee]

Zoe Chase and Jacob Goldstein noticed Spirit was the fastest growing airline in America and also one of the most hated. So they decided to to book a ticket.

[Zoe Chase]

Good morning, Zoe.

[Jacob Goldstein]

Good morning, Jacob.

[Zoe Chase]

We're at LaGuardia Airport in New York. It's very early in the morning.

[Emma Peaslee]

Yes, it is.

[Zoe Chase]

We are going to fly on spirit Airlines to Fort Lauderdale, Florida.

[Jacob Goldstein]

And it costs us $68 to fly from here to Fort Lauderdale.

[Zoe Chase]

$68.99.

[Jacob Goldstein]

But, but, but, where to begin? There are so many buts. Everywhere you turn there are fees.

[Zoe Chase]

30 bucks to pick our seats.

[Jacob Goldstein]

If you want water on the plane, it costs $3.

[Zoe Chase]

And then you got the bag full.

[Jacob Goldstein]

One personal item. You can't have two.

[Zoe Chase]

Just the messenger bag in the backpack.

[Jacob Goldstein]

That's gonna be $50.

[Zoe Chase]

It's 50 bucks to carry on. What if I check it?

[Jacob Goldstein]

I think it's 45. Spirit Airlines is a subway car in the sky. There are ads on the overhead bins. I've never seen that before.

[Zoe Chase]

And there are also more seats on the plane, which means they're closer together. There's less leg room.

[Jacob Goldstein]

How are your knees?

[Zoe Chase]

I mean, they definitely reach the seat in front of me.

[Jacob Goldstein]

I feel like you are perfectly sized for this situation.

[Zoe Chase]

If the guy in front of me were to put his seat back, I'd be screwed. The good news is on Spirit Airlines, you cannot put your seat back.

[Jacob Goldstein]

Chris Patrizio, across the aisle from us, leans over and whispers into my ear, this sucks. Tell me.

[Zoe Chase]

I had to ask them if they charged to go to the bathroom.

[Ben Baldanza]

They charged for coffee.

[Zoe Chase]

This is the first time we've used Spirit and it's going to be the last time we use Spirit.

[Jacob Goldstein]

And lots of people feel this way about Spirit Airlines.

[Ben Baldanza]

Nothing was free. No water, nothing.

[Emma Peaslee]

Peanuts. I've never flown an airline, even when

[Zoe Chase]

you were up in the air for

[Emma Peaslee]

one hour where you didn't get a Cookie, a cracker and a cup of ice water.

[Greg Rosalski]

It's a mess. They charge for everything.

[Zoe Chase]

It's a total zoo in the terminal

[Ben Baldanza]

and everybody's scrambling and no one's nice.

[Zoe Chase]

But our plane is basically full of people. And across the country, Spirit is adding planes, they're adding new routes. In fact, Spirit is the fastest growing airline in America.

[Jacob Goldstein]

Spirit Airlines is a billion dollar company, but you wouldn't actually know that when you look at its headquarters. It's this generic office park, right? You open the door from the sidewalk and there's just a dingy little room. There's no receptionist. The only thing there is a chair, a little table and a phone. You pick up the phone and you call whoever you're there to see. And we were there to see Ben Baldanza, the CEO of Spirit Airlines.

[Zoe Chase]

And a lot of CEOs are boring interviews. They use a lot of jargon, they talk in a very bland way. Ben Baldonza is not like that.

[Ben Baldanza]

Well, if we were a retailer, we would, you know, some, maybe some high service airlines in the world would think of themselves as a Nordstrom's or something. And maybe, I bet if you were going to talk to the guys at JetBlue, they'd say maybe we're Target or maybe even trying to become a little better than Target. We're Dollar General, that's who we are. We're not even Walmart. We're Dollar General. And we like being Dollar General because we save people lots of money.

[Zoe Chase]

You can see the Dollar General thing in Baldanza's office. It's an ordinary office on the ground floor. He's wearing a short sleeve shirt and there's some big windows. So he leaves the lights off to save money.

[Ben Baldanza]

I'll turn the lights out for you. Look, one bulb and those three goes on. That's the only thing that turns on when I turn the lights on in this office. One bulb in those three. There's no reason for me to waste that money.

[Jacob Goldstein]

And to compare your company to the Dollar Store, that's kind of an unusual comparison for a CEO to make, especially in the airline industry. Airlines have always tried to sell themselves to us as the nicest, the most comfortable, the most legroom. Like this ad from United, for instance.

[Sponsor/Advertiser]

More room in Economy plus, more comfort,

[Emma Peaslee]

more of what you need.

[Zoe Chase]

Ben Baldonza spent most of his career making that pitch.

[Ben Baldanza]

I spent over 20 years in what people think of as the traditional airline business. I worked for American Northwest, Continental Airlines, US Airways, an airline down in Central America. And all those airlines were the same in the sense that their purpose in life was to try to attract a higher fare customer. I would go to bed at night thinking, how can I get you to pay more for your ticket?

[Zoe Chase]

Baldonza's outlook changed not long after he got hired by spirit back in 2005. Spirit used to be just one more mediocre bargain airline in a crowd of mediocre bargain airlines. Spirit was competing on price. Yeah. But they were also trying to do the other stuff, and it wasn't really working.

[Jacob Goldstein]

So in 2006, Ben Baldanza and Spirit Airlines made a decision. They were gonna try to do in America what airlines like Ryanair and AirAsia were doing in other parts of the world. They were gonna build an airline that just competed on price, rather than an

[Ben Baldanza]

airline that was gonna compete for our customers on any other basis. And any sort of physical product or experience or, you know, zagat score or anything like that. Right. It's gonna be cheap. So once you make that decision, other decisions become a lot easier. So to keep our fares lower, we charge separately for checked bags and for large carry on bags. And to print your boarding pass with a human being and to eat or drink on board and to pick your specific seat assignment. We fly our planes more hours per day. We put more seats in every airplane. I mean, it's very easy to decide to put more seats on the airplane when you want to have a low price.

[Zoe Chase]

When you buy a ticket on most airlines, here's what you're paying for. A ride to wherever you're going, and a few other things. A bottle of water, a Coke, space in the overhead bin if you want it. And you're paying for those things whether you use them or not.

[Jacob Goldstein]

When you buy a ticket on Spirit, all you're paying for is the ride. That's part of the reason that Spirit is so cheap.

[Ben Baldanza]

There's an airline out there, I'm sure you know their name, that spends a lot of money telling you that their bags are free. But their average tickets are $50 to $60 higher than ours. It's expensive to carry bags. You hire people to load the bags. You pay for bag belts in the airports and the rental space to do that. Every once in a while, you lose a bag or you break a bag. And so you have to have insurance to cover that. It is not free to carry bags. So you either charge the people who use it or you charge everybody whether they use it or don't. And we think it's fairer to charge customers for what they use and not charge them for what they don't use.

[Zoe Chase]

So basically, the flight attendant coming down the aisle with the cart with water and soda and coffee, that is not like Spirit Airlines serving me as a valued customer. That's just like a little 711 rolling down the aisle.

[Ben Baldanza]

That's exactly right. Spirit serving you as a valued customer is letting you fly to New York for $69 when everybody else is charging 150. Or letting you get to Nicaragua for $99 when everybody else is charging 250. That spirit serving you as a valued customer. In addition, we'll let the 711 be available to you while you're in the airplane. And if you want to buy, great. And if you don't, that's okay, too.

[Zoe Chase]

I think Spirit is the first place where I have seen ads inside the airplane. I saw an ad on the overhead bin for a casino and an ad on some of the tray tables, like right in your face for booths.

[Ben Baldanza]

Yeah. And we have ads on our flight attendant aprons, too. Isn't that great? Because people pay us to put that ad there and your fare could be lower.

[Jacob Goldstein]

Valdanza's case for Spirit Airlines make sense. Pay for what you use, don't pay for what you don't use. And Spirit is really cheap.

[Zoe Chase]

But lots of people just expect an airline to be a certain way. And when they get on Spirit and find out they're basically on a flying bus, they don't like it. In fact, Spirit Airlines came in dead last on a survey Consumer Reports published last year. Let me just start by reading. I'm sure you've read this, but I'm going to read from it. So this is a Consumer Reports, a big survey from last year. Thousands of flyers. Consumer Reports says bottom ranked. Spirit Airlines received one of the lowest overall scores for any company we've ever rated. How does that square with the great story you just told me?

[Ben Baldanza]

They're elitist, and I will tell you why. That survey never asked customers about the price of their ticket. And since they don't ask about the price, it's absolute bunk. If you want to tell me that an airline that has more legroom and serves you more on board and has nicer lighting on the airplane is a better airline than ours. But forget to say they charge $400 and we charge $99. Why doesn't consumer Reports put out a survey saying that a Mercedes S Class is better than a Ford Focus? It's true. Why don't they put up that survey? The Mercedes S Class is better than a Ford Focus So why doesn't everybody buy Mercedes S classes?

[Zoe Chase]

I got one more line on Consumer Reports. Also, the survey has a thing that's just called the reader score. This score is not check these boxes. It's just, how do you feel about this airline? Do you feel good or do you feel bad? And Spirit is the worst on that one too.

[Ben Baldanza]

Here's the reality. If you go into the dollar store and you're expecting to buy a nice three piece suit, you're gonna be really disappointed. No one should come to Spirit and complain. We don't have legroom. We're not a store that sells legroom. We don't want anybody to be surprised that we charge for water on board or that we charge for large carry ons and things like that. We don't want anyone to be surpr. But some people still are. And that's a failure of our company when they don't understand that reality.

[Zoe Chase]

On our trip, we talked to a lot of people who did not understand that reality. They seemed surprised and angry and they said they were never gonna fly Spirit again.

[Jacob Goldstein]

And also we talked to some people who were totally on board with Spirit's program. Yes, it sucks that the seats don't recline and you have to pay to use the overhead bin, but it's cheap. And I planned ahead and I'm happy with this trade off.

[Zoe Chase]

So clearly there are those two kinds of Spirit customers. But I wondered, is there a third kind? So is it possible that there are people who know what they're getting into who fly Spirit but who sort of hate it? Like, I want to get the deal, but like, I know I hate getting, you know, nickel and dime, three bucks for water. Like the conflicted Spirit Flyer. Are there people who are like, hate flying Spirit?

[Ben Baldanza]

I think there are people who absolutely are like that. And I've met some. In fact, I was at a meeting a little while ago and the person leading the meeting looked around the table. There were about 10 people from the company there said, have any of you flown Spirit? And one guy said, yes, I fly them all the time. And she said, what do you think of them? He said, I hate them. And she said, well, why do you fly them? He said, well, they're so cheap.

[Zoe Chase]

Thank you for flying with us this evening.

[Jacob Goldstein]

Back on her flight home, Barbara Dingas, our flight attendant, says she sees the Heat flyers all the time. They say they'll never fly Spirit again,

[Emma Peaslee]

but I guarantee you they'll be back. Why are our flights all full? Because those people come back, they're getting

[Ben Baldanza]

mad because they have to, you know,

[Emma Peaslee]

get their credit card out or whatever and think that they're going to get everything for free. Trust me, I know enough to know that people complain. They get off. I remember faces, they come back on.

[Zoe Chase]

Economists make this distinction between stated preferences and revealed preferences. Stated preferences are what people say they want, and then revealed preferences are what people actually choose when they go out and buy something.

[Jacob Goldstein]

And Spirit hits both of those things. When you ask people on a poll or whatever what's most important to them when they pick an airline, they say, above all else, a low fare, that's a stated preference. And then more and more people are actually going out and buying tickets on Spirit Airlines. That's the revealed preference. And yet. And yet so many people just hate it.

[Zoe Chase]

Human desire is weird. Sometimes. We don't want what we think we

[Jacob Goldstein]

want, or we do want it, and then we kind of hate ourselves for wanting it.

[Zoe Chase]

We pick the cheap option and then we feel kind of dirty about it. We say we'll never do it again, even though we know deep down we probably will.

[Emma Peaslee]

Ben Baldonza died in 2024. He is widely credited as leading Spirit during a period where the airline changed the whole industry, pressuring carriers to lower fares. So how did it all go so wrong? For Spirit and other budget airlines, the story is so much more than high fuel prices. After the break, the revenge of legacy carriers and the new talk of a government bailout.

[Sponsor/Advertiser]

Support for this podcast and the following message come from E. Trade from Morgan Stanley. Simplify your finances and discover the convenience of investing in banking all in one place. Plus, get up to $1,500 when you open a brokerage account with a qualifying deposit today. Learn [e-mail] offer banking products and services are provided by Morgan Stanley Private Bank, national association member FDIC Terms and other fees apply. Investing involves risks. Morgan Stanley Smith Barney, llc.

[Emma Peaslee]

Member SIPIC okay, welcome Greg Rosolski, our resident newsletter writer.

[Greg Rosalski]

Emma, always a pleasure.

[Emma Peaslee]

So you've been talking to airline industry experts and you have some answers for us?

[Greg Rosalski]

I do. Emma, I hope your tray table is stowed in an upright and locked position and that your seatbelt is fastened, because we're about to go on a journey. It's time for liftoffs.

[Emma Peaslee]

The plane's taken off. Okay, so let's start with reviewing the trajectory of Spirit Airlines through a few headlines that we've seen in the past week or so. So I'm going to read a couple for you. Spirit Airlines looked like it was in the clear, but rising fuel costs are threatening its bankruptcy exit.

[Greg Rosalski]

Not the best headline, I'm going to be honest.

[Emma Peaslee]

Spirit floats government stake to avoid possible liquidation. Spirit airlines close to 500 million bailout from Trump administration.

[Greg Rosalski]

Oh, I'm perked up. I'm clicking on that one.

[Emma Peaslee]

Spirit Airlines could be used to transport troops, military cargo if Trump Admin takes over bankrupt carrier.

[Greg Rosalski]

Didn't see that one.

[Emma Peaslee]

And then this clever Wall Street Journal editorial. A dispiriting airline bailout.

[Greg Rosalski]

Love a good pun in the. In the headline.

[Emma Peaslee]

Yeah. If you want more puns, check out Greg's newsletter.

[Greg Rosalski]

Yeah, so this is all pretty incredible, right? I mean, the federal government is now basically flirting with the idea of getting into the airline business and maybe taking, like, an ownership stake in it. I mean, the Trump administration did do something similar with US Steel last year, and, yeah, they could maybe sell the stake later and maybe make a profit and this will all work. But still, like, this is not the typical way that, like, US Capitalism works. And as of now, the bailout idea kind of stands like this. Spirit has said it wants a bailout. Last week, President Trump suggested he might be open to it at the right price. More recently, the Transportation Secretary suggested he thinks that Congress would have to get involved.

[Emma Peaslee]

Okay, so bailout tbd.

[Greg Rosalski]

Yeah.

[Emma Peaslee]

So let's talk about how Spirit went from the fastest growing to near liquidation. You broke all this down in your newsletter and you make the point that it's not not just Spirit that's struggling, it's a lot of budget airlines.

[Greg Rosalski]

That's right. You could call it the revenge of the legacy carriers.

[Emma Peaslee]

Yeah. So we're going to focus on these three factors for how big legacy carriers got their revenge. So first, they copy Spirit to steal the customers back. Then they sweeten their loyalty programs to keep the customers. And then third, the economy sort of does the rest of the work for them. Budget travelers get pushed out of the market. So let's start with factor one, this copycat strategy.

[Greg Rosalski]

Okay, so the legacy airlines, they look at Spirit and other budget airlines and clearly they're eating their lunch. They're charging lower ticket prices up front, and that seems to be working. So Delta and American and United, they also start throwing creature comforts out the window for passengers not willing to pay for them. And this way, they could also charge a lower upfront ticket price and compete for budget travelers.

[Emma Peaslee]

Yeah, they kind of take this to the next level. Right. When they released this program called Basic Economy, which I book a lot.

[Greg Rosalski]

I'm a Basic Economy kind of guy. Okay. Do I love it?

[Ben Baldanza]

No.

[Greg Rosalski]

Do I When I walk by the first class section, do I give a little side eye?

[Emma Peaslee]

Do you wish you'd made other decisions when you booked?

[Greg Rosalski]

In truth, no. My revealed preference, it's definitely cheaper fares. And there are a lot of people out there like me.

[Emma Peaslee]

Okay, so cheaper fares, less legroom, character building, more fees. And now these Spirit customers can basically get the same deals on legacy airlines. So that's factor one. Next is these loyalty programs.

[Greg Rosalski]

Yeah, and this is where it got particularly interesting for me because I spoke with this guy. He's an economist. His name is Severin Borenstein. He's an economist at the UC Berkeley Haas School of Business. And he told me that basically the big legacy carriers, they've been leveraging their market dominance, like their market position, and they've been making it much harder for smaller budget airlines to compete. And they've done this by making their loyalty programs like, more enticing, more powerful. Think like, you know, co branded credit cards, corporate partnerships, enhanced frequent flyer programs.

[Zoe Chase]

In many cases, it was not changing the total offering at all, but simply giving one customer priority over another.

[Greg Rosalski]

Now, importantly for loyalty programs to work, scale really matters. And that's something that the big legacy airlines have. They have scale. And when an airline flies everywhere you want to go, the rewards are more useful, the perks are easier to redeem, and the status feels worth chasing.

[Emma Peaslee]

And this is a pretty, pretty big problem for Spirit and other budget airlines. Right, because they're smaller, it's hard for them to compete with these big loyalty programs.

[Greg Rosalski]

Exactly. And Severin actually goes a step further and he makes this argument that actually, these loyalty programs, they're a big problem for a healthy competitive market because it means airlines aren't just competing on the price or the experience of getting from point A to point B. Now you have all these, like, weird loyalty incentives for consumers to, like, ignore competitors.

[Zoe Chase]

Loyalty programs play a huge role in allowing airlines like Delta and American and United to leverage their network size in ways that have nothing to do with actually offering higher quality service.

[Emma Peaslee]

So first the legacy carriers lower fares, they create basic economy. Then they lock in customers with beefed up loyalty programs where size is an advantage. But Spirit lives on with its core customers, these budget travelers who don't fly enough to care about loyalty points.

[Greg Rosalski]

Yeah, they still had them, at least until everything got much more expensive. But then the cost of everything just starts exploding. Like since the pandemic, we're talking higher energy costs, higher material costs, higher labor costs, there's a pilot shortage. Like, there's a whole bunch of issues in the, in the industry. And my sources told me that the budget airlines have just had a much harder time absorbing these costs. I spoke with Henry Hart Development, he's a longtime industry analyst and he's like, yeah, the bread and butter of budget airlines is budget ticket prices. But when your costs go up, your

[Zoe Chase]

fares have to go up.

[Greg Rosalski]

And if your costs go up too much, you're less able to offer the dirt cheap fares that your customers expect you to offer.

[Emma Peaslee]

Okay, so so far everything has been on the supply side. So the airlines themselves, but what about the demand side?

[Greg Rosalski]

Yeah, the demand side, the price sensitive consumers themselves, they've been struggling. I don't think this is a secret either. Like high inflation, higher interest rates, a cooling labor market, this long run trend of growing inequality, all this has been reshaping American spending patterns and it's been hurting businesses that cater to low and middle income Americans. For example, Dollar General has struggled as their core consumers spend less. And something similar has been happening with Spirit. Budget airlines historically appealed to customers with limited income. And in our research we have seen travelers who earn up to $150,000 a year saying they have cut back on their leisure travel.

[Zoe Chase]

They are traveling less often.

[Greg Rosalski]

They are in some cases foregoing air travel.

[Emma Peaslee]

Okay, so flying optional, obviously. Gas and groceries, not so much. So to sum it up, we've got legacy airlines competing on price with things like basic economy supercharged loyalty programs and a disappearing customer base. That all brings us to today where we are now talking about a potential government rescue program for Spirit Airlines or maybe having another airline buy them.

[Greg Rosalski]

Yeah, and this would be a pretty big reversal from a few years ago when the Department of Justice under President Biden fought to block Spirit from merging with JetBlue and then won in federal court. There's been some debate about that decision, especially now that Spirit is facing trouble. Where there's less debate, though, if Spirit were to die, that would likely put less pressure on the big airlines. So yeah, Spirit may be hated, but a world without it would probably be bad for a lot of passengers, even those who don't like flying with them.

[Emma Peaslee]

This episode began as a newsletter by Greg, and he writes a weekly deep original essay about something going on in the economy. They're always going viral. You can check them [e-mail] planetmoney newsletter. We'll also have a link in the show notes. And if you want more airline history, we have another episode that tells the story of the original budget airline long before Spirit. We'll have a link to that in the show notes as well.

[Greg Rosalski]

If you picked up a copy of the Planet Money book, thank you so much. If you haven't. It's in stores now and we're so proud of it. It's called Planet Money, a guide to the economic forces that shape your life. It's in airport bookstores and makes a great read on a plane. This episode of Planet Money was produced by Emma Peaslee and edited by Alex Goldmark. It was fact checked by Vito Emanuel and engineered by Jimmy Keighley.

[Emma Peaslee]

I'm Emma Peaslee.

[Greg Rosalski]

And I'm Greg Rosalski. This is npr. Thanks for listening.

[Zoe Chase]

As always, we want to hear from you. You can email us at npr.

[Emma Peaslee]

Take 2.

[Zoe Chase]

As always, we want to hear from you. You can email [e-mail] you can find

[Jacob Goldstein]

us on Facebook from spirit Airlines Flight

[Zoe Chase]

710, somewhere between Fort Lauderdale and New York. I'm Jacob Goldstein.

[Jacob Goldstein]

And I'm Zoe Chase. Thanks for listening.

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[Zoe Chase]

Com.