The U.S. Budget Airline Model Is Facing Turbulence: Why Low Fares Aren't Enough Anymore

With Spirit Airlines grounded, travelers face fewer budget-friendly options this summer. This shift suggests a potentially permanent change in air travel, where the era of ultra-low-cost carriers (ULCCs) may be drawing to a close. For decades, the primary driver for airline ticket purchases was price, a phenomenon that fueled the rise of airlines like Spirit and Frontier. However, the demise of Spirit signals a new era, one that might resemble a return to a 'Golden Age' of travel, potentially leaving many everyday flyers less than pleased.

Passengers board an Avelo flight at Tweed-New Haven Airport.

Connecticut Public Broadcasting | Getty Images News | Getty Images

Recent financial reports from major airlines like Delta and United underscore this trend. Delta Air Lines reported record revenue for 2025, yet surprisingly sold less in economy tickets than the previous year. The slack was taken up by premium cabins, loyalty programs, and cargo, which now account for 60% of Delta's total revenue. Delta CEO Ed Bastian described a 'K-shaped' market, with strength at the higher end of the consumer spectrum and struggles at the lower end. He noted that demand for premium seats is growing fastest, and airlines are capitalizing on customers willing to pay for comfort and service.

United Airlines' performance mirrors this. While overall profits increased, revenue from premium seats saw a significant jump. Both airlines are experiencing strong demand from less price-sensitive customers. Experts like Kyle Potter of Thrifty Traveler point out that rising costs, including pilot salaries and jet fuel, make it difficult for airlines to offer consistently low fares. Scale is now crucial for airlines to compete effectively.

The current economic climate presents a 'chicken-or-egg' scenario for aspiring budget carriers. While jet fuel prices have impacted all airlines, smaller carriers without the advantage of scale are hit harder. U.S. carriers experienced a substantial increase in jet fuel costs in early 2026. Geopolitical events, such as tensions around the Strait of Hormuz, can cause rapid fluctuations in fuel prices, further straining the bottom lines of low-cost carriers. The major airlines, particularly American, Delta, and United, leverage their scale and lucrative loyalty programs to outmaneuver smaller competitors.

This leaves existing ULCCs vying for less contested airports or attempting to grow their own scale. Allegiant's acquisition of Sun Country is an example of this strategy. However, there's a limit to this growth. Airlines like Allegiant, Breeze, and Avelo have found a niche by connecting smaller, underserved cities. If they attempt to become nationally relevant, the major carriers are likely to exert significant competitive pressure.

Southwest Airlines has adjusted its operations, consolidating flights at Midway Airport in Chicago. JetBlue is reducing its presence at New York airports like LaGuardia and Newark, while focusing more on its Florida operations. Scott Schaefer, chair of the Economics Department at the University of Utah, notes that remaining ULCCs will struggle to fill the void left by Spirit, especially in a high-fuel-cost environment. He also points out that Spirit only served about 2% of the flying public, indicating the void isn't massive.

Breeze Airways Bets on a Different Model

Breeze Airways, founded by JetBlue founder David Neeleman, claims to operate under a different model than traditional ULCCs. Breeze focuses on underserved routes from secondary airports, offering nonstop flights to destinations that would otherwise require multiple connections. While their base fares can be low, they offer tiered pricing with higher-cost options that include premium seating and amenities. Breeze is reportedly exploring an initial public offering (IPO) by 2027, though no official announcement has been made.

"The demand in those markets continues to prove out," a Breeze spokeswoman stated, highlighting a 95% airport retention rate as proof of market need. Breeze's strategy revolves around connecting communities historically overlooked by major airlines, such as Akron-Canton, Ohio, and Evansville, Indiana.

Europe: A Stronger Ground for Low-Cost Carriers

While ULCCs will continue to seek a foothold in the U.S., Europe remains a more established market for the model. Michael Taylor, a senior managing director at JD Power, explains that the longer flight distances in the U.S. make it harder for ULCCs to achieve the rapid turnaround times crucial for profitability. European countries, being geographically closer, allow for shorter flights that better suit the ULCC model.

Even in Europe, budget carriers are facing pressure. Record jet fuel prices have impacted airlines like EasyJet, leading to significant losses. Ryanair's CEO has warned of potential bankruptcies in Europe this winter if current conditions persist.

Rob Mather of IFS argues that Spirit's struggles pre-dated the current fuel price hikes and that the ULCC model itself isn't inherently flawed, but rather that already struggling companies are facing immediate consequences. He notes a shift in traveler preferences, with Millennials, now a larger segment of the traveling population, being more willing to pay a premium for a better overall travel experience, including reliable service and strong customer support. Inflation has also narrowed the price gap between low-cost and full-service options when ancillary fees are considered.

Despite these shifts, some travelers still value budget options. James Jeansonne, a marketing professional, laments the loss of Spirit, emphasizing the need for affordable air travel for families and individuals to experience the world. Roxana Colorado, a business owner, has turned to Frontier Airlines, asserting that many travelers, including small business owners and families, prioritize realistic prices over premium experiences.

Travel experts suggest that customers can mitigate costs by being more strategic, such as bringing their own snacks to save on airport food expenses, allowing more budget for seat selection. Audrey Kohout of Luggage Forward advises travelers to consider the full cost of their trip and cut expenses elsewhere to prioritize what they value, like avoiding checked bag fees.

With the loss of Spirit, rising fuel costs, and the peak summer travel season, airfare prices are expected to be under significant pressure.

CNBC's Sawdah Bhaimiya contributed to this report.