According to AAA, this week will mark the busiest Thanksgiving for air travel in history, with more than 5.8 million passengers flying domestically. Only a small percentage of them are booked on Spirit, the troubled airline that filed for Chapter 11 bankruptcy protection last week. Yet millions of others — make that almost all of us — benefit from Spirit’s presence and should give thanks for its existence. Even the smallest of airlines can have an outsized effect on pricing, and bring down larger rivals’ fares for dozens of routes across the country.
In the short term, many who are flying on Spirit are rightfully concerned about being delayed or even stranded in the coming days and weeks. It’s likely they can rest easy — or at least as easy as any other passenger at this busy time. Peak travel snafus and winter weather may be beyond our control, but Spirit is likely to pull through this reorganization.
Spirit’s survival will be good news not just for its customers, but all U.S. airline travelers.
The truth is bankruptcy has less of a stigma for airlines than with other industries. Seeking such protection — whether Chapter 11 reorganizations or Chapter 7 shutdowns — is far from uncommon among U.S. carriers. Since the industry was deregulated in 1978, there have been at least 214 filings. Among the current 12 scheduled passenger airlines, six of them have filed at least once, including the Big Three carriers American, Delta and United.
As restructurings go, this plan is quicker and more straightforward than many. Spirit states that it expects to emerge from bankruptcy in the first quarter of 2025 through a package that combines equity investments, a bondholder loan for $300 million, and the conversion of debt into stock. As The Associated Press noted last week: “People are still flying on Spirit Airlines. They’re just not paying as much.”
Spirit’s survival will be good news not just for its customers, but all U.S. airline travelers. The domestic airline industry has never been more concentrated since the 1910s, presenting fewer choices for passengers. Those who would argue Spirit’s national market share of 5% is statistically insignificant ignore how unique the airline industry is. Each and every route in America is critical to the customers booking flights on that route, and no city-to-city route in the country is served by every domestic carrier. National market share matters far less in an industry that is measured route by route.
In fact, Spirit has a considerable presence in many cities and on many routes. According to the Department of Transportation, Spirit has the largest market share in Fort Lauderdale, with 30%, and also has a large presence in both Orlando (16%) and Las Vegas (15%). It operates 18 nonstop routes out of Detroit, including eight where it is the sole carrier competing against one or more of the Big Three. At Chicago’s O’Hare Airport, where both American and United operate hubs, Spirit is the only competitor for those two airlines on eight nonstop routes.
This competition with the Big Three is particularly important because those airlines, combined with Southwest, control 80% of the domestic market. They effectively stopped competing head-to-head on price years ago. The only real discipline and competition on fares come from Spirit and other low cost and ultra low-cost carriers. As a result, Spirit’s withdrawal from a given route — whether through bankruptcy, merger or predatory behavior by a larger rival — means all passengers between those two cities will pay more.
While some have argued that the blocked merger pushed Spirit into filing for Chapter 11, this view is mistaken.
Unfortunately, Spirit’s previous attempt to avoid bankruptcy — a proposed merger with JetBlue — would have hurt travelers. My organization, American Economic Liberties Project, strongly opposed the merger, which the Biden administration sued to prevent in 2023. Federal Judge William G. Young blocked the merger in January of this year, noting that JetBlue’s cost structure and fare structure were higher than Spirit’s and the merger would harm passengers throughout the U.S. who would no longer access Spirit’s low fares.
While some have argued that the blocked merger pushed Spirit into filing for Chapter 11, this view is mistaken. At no time during the trial did either company invoke the “failing firm” defense, where a company argues that, absent a merger, it would be bankrupt. While attending that merger trial, I saw Spirit CEO Ted Christie testify that Spirit was prepared to go it alone without JetBlue if necessary, an assertion he repeated after the trial. Furthermore, in his ruling, Judge Young wrote that the companies “presented no evidence that Spirit was in such a dire financial situation that it had no hope for the future; instead, multiple Spirit executives testified that the airline had a plan to return to profitability.”
Now it’s time for Spirit to enact that plan — and for America’s aviation industry to be overhauled. Airline bankruptcies, like airline mergers, were extremely rare from the mid-20th century to the late 1970s, when the industry was more heavily regulated. Since then, they have become chronically frequent. Such disruptions can cause untold pain for consumers, workers, creditors, entire cities and even regions of the country.
In the short term, Spirit needs to return to financial health; in the long term, the industry needs fixing. Those who dismiss the value of ultra low-cost carriers like Spirit should be careful — the loss of Spirit undoubtedly would lead to fare hikes nationwide. An aviation system that continually forces either further consolidation via mergers or further consolidation via bankruptcies is clearly broken.