Are budget airlines on the endangered list?

Patrick Phillips is a budget-airline devotee. A 24-year-old consultant, he regularly travels from his home in Dallas to visit friends in Nashville or beaches in Florida thanks to cheap flights. An upcoming birthday trip to Las Vegas cost him $88 round-trip.

So, when Spirit Airlines announced changes last week meant to appeal to higher-spending customers, Phillips started to worry. The new options will go on sale Aug. 16.

“I’m afraid they’re going to have limited quantity” of the cheapest options, said Phillips, who packs light to avoid budget carriers’ baggage fees. “If … that bottom tier is going to be limited, it’s going to be much harder for me to find those flights.”

Spirit is one of three U.S. budget airlines that are making fundamental changes to their business models as they struggle to boost revenue. Those reinventions have longtime fans, especially those on a budget, asking: What about us? And is the nickel-and-dime approach to air travel on its way to extinction?

“Full-service airlines spent the past decade copying budget airlines, but now the tables have turned - it’s budget airlines that are copying full-service airlines,” said Scott Keyes, founder of the cheap-flight alert service Going. “That’s a real surprising and stark runaround from where things were pre-pandemic.”

Spirit and Frontier, two ultra-low-cost carriers that built a strategy around selling cheap fares and charging fees for add-on amenities, are now bundling those services back together for passengers willing to pay more - and offering cushier front-of-plane options. Spirit is offering snacks, alcohol and free WiFi in its version of domestic first class.

“They’re in some ways waving the white flag and saying the ultra low-cost, low-fare but high-fee business model is not working right now,” said Kyle Potter, executive editor of Thrifty Traveler.

And Southwest, which has offered an open-seating policy for decades, said it will soon assign seats and dedicate roughly a third of the cabin to premium, extra-legroom options. Previously, Southwest’s travelers could choose their seat as they boarded the plane, picking from the front row, if available, at no extra charge.

“Quite frankly, they were leaving millions of dollars on the table every year that customers would have been happy to pay for and their shareholders had lost patience with them leaving that money on the table,” said John Grant, an analyst at the travel data provider OAG.

The airlines are hoping their mix of tickets will shift to drive greater revenue, with fewer fares priced at the bottom end and more at the top, said Robert W. Mann, a consultant and former airline executive. That could present a challenge for budget-conscious fliers.

“If you’re seeking low fares, you may have to look harder or take more compromises,” Mann said.

‘Ending the golden age of budget airlines’

The changes come amid a difficult stretch for many U.S. airlines’ revenue amid high costs and a post-pandemic abundance of domestic capacity that has kept prices low. Spirit is mounting a turnaround after its effort to merge with JetBlue failed earlier this year; Frontier had made the initial bid to acquire Spirit, but shareholders nixed the plan. Frontier recently cut dozens of routes in response to the industry’s oversupply of seats, the Points Guy reported last week.

Budget airlines are eager to capture some of the travelers who pay a premium for traditional airlines like Delta and United, which benefit from having a base of higher-spending fliers while also competing for the lowest-paying travelers with basic economy fares. Major airlines have said their premium business is growing, too.

“If people can figure out how to do a mixture of basic economy and higher standard offerings - and actually do it well - then that’s actually what people are looking for,” Mann said.

The budget airlines’ changes are jarring for passengers accustomed to gaming the budget-airline system to lock down the cheapest flights.

Jared Feuer, an Atlanta resident who works for a nonprofit, said he watches low-cost carriers carefully as someone who regularly flies budget airlines, most often Frontier, for work and personal trips. He’s not sure who will spend extra for a better experience on a budget airline.

“If I want a nicer experience, I’m going to pick a nicer airline,” said Feuer, 48. “The point is the low fare. So I’m curious who they’re appealing to.”

It didn’t sound as though it was people like him.

“The writing on the wall is that we are ending the golden age of budget airlines,” he said.

In announcing its new options, Frontier said it was “providing exceptional value and a superior travel experience” with its changes that include premium and business offerings. Spirit said in a news release that it wanted to offer “an elevated guest experience at an affordable price.”

Still, Spirit emphasized in a statement to The Washington Post that it “always has been, and always will be, about delivering value to travelers who prefer to save on their flights.” Prices for the new options will vary according to demand.

Keyes said Spirit could attract customers with its higher-end tier who might otherwise choose a full-service airline - especially if Spirit had a direct flight and its competitor had a connection.

And Southwest, which for decades stood apart for its unique seating system, has said its own research shows the vast majority of current and potential customers prefer assigned seats, while “many customers strongly prefer” sitting in a premium part of the cabin.

But not everyone. Months after Frontier started selling economy, premium and business bundles, Feuer said he has managed to find low, basic fares on the airline.

“They’ve added options, which I completely ignore,” he said.

A risk for airlines and fliers

Travelers can turn to some smaller ultra-low-cost airlines, like the newcomers Breeze and Avelo or the more established Allegiant and Sun Country, though some of those sell their own higher-priced bundled fares. But none of those carriers has the same national reach as Frontier, Spirit and Southwest, making them less viable substitutes for many.

In the short term, some of the larger budget carriers’ recent changes are positive for travelers, Keyes said. Spirit has gotten rid of fees for changes or cancellations, and Frontier is dropping those fees for all but its cheapest tickets.

If the airlines designate fewer seats for their cheapest fares, savvy travelers can take steps to snag them.

“I wouldn’t fear for the budget traveler who is willing and able to book well in advance and carefully researches what the product is they want to buy,” said Grant, from OAG. He said that planning in advance and knowing what you’re buying are key for customers of low-cost airlines. “That’s not changing at all,” he said.

Adding premium seats doesn’t change the fact that airlines like Spirit and Frontier are still budget carriers down to their bones, with less legroom on average than competitors that charge more.

“One of the reasons why a budget airline like Spirit or Frontier is always going to have cheaper fares than Delta or United is because there’s certain things that they just can’t change,” Keyes said.

In the longer term, Keyes said, the moves to attract more premium customers could be a gamble because it could cost the airlines more. He said he was hesitant to “bet the farm” on a continued bad run for the budget airlines. But he said if the current conditions for travel and the economy continue - too much domestic airline capacity, outsize demand for premium and long-haul international travel - then the carriers could be in “existential trouble.”

“They’re hoping this is going to lead to higher revenue,” he said. “They might not succeed; it might not work.”

And if carriers like Spirit and Frontier don’t succeed, it could be bad news for everyone who books a flight.

That’s “including people who never fly budget airlines,” Keyes said. “We owe them a debt of gratitude for helping keep fares lower across the board.”

Even a best-case scenario - one that sees Spirit and Frontier turn their businesses around - probably will come at a price to consumers, said Potter, the Thrifty Traveler editor. He said both airlines are “clearly gunning for people who are willing to pay a little more now,” regardless of where they’re sitting on the plane.

“I don’t think that there’s an outcome from this … where fares don’t increase as a result for everybody,” he said.