JetBlue founder and low-cost airline veteran explains how struggling airlines need to adapt to survive right now

• Budget airlines for illustration Spirit, Frontier, and Southwest are struggling to move a profit.
• Low-cost seasoned David Neeleman told BI that Spirit and Frontier should merge to survive.
• He said Southwest and others should thin into changing times and springiness customers much choice.

Budget airlines are starting to look very different from their accepted no-frills roots. High costs, razor-thin margins, and an evolving recreation marketplace person forced them to move gears.

Low-cost hose seasoned David Neeleman — laminitis of 5 fund carriers since 1984, including JetBlue — told Business Insider that immoderate of these struggling airlines person grounded to accommodate to a changing industry, particularly successful nan uneven post-pandemic recovery.

He suggested Spirit and Frontier, which haven't turned profits since 2019, should merge their businesses for illustration Alaska Airlines and Hawaiian Airlines did earlier this year. That is, if they tin get it past national regulators. In January 2024, a judge blocked JetBlue's $3.8 cardinal woody to bargain Spirit.

"I deliberation location is simply a spot for [ultra low-cost carriers] successful nan market, but Spirit and Frontier had overlapped routes, truthful they were competing pinch everyone other and each other," Neeleman said successful an interview. "I deliberation if they extremity competing pinch each other, they could carve retired a niche, though it won't turn astatine nan aforesaid complaint arsenic before."

The Wall Street Journal reported successful October that Frontier was considering different connection to bargain Spirit successful a woody that's been on-and-off for years. Frontier CEO Barry Biffle declined to remark connected nan communicative during nan company's net telephone connected Tuesday.

Neeleman besides said that Southwest, Spirit, and Frontier could use from adopting caller money-making strategies, for illustration bundling fares, offering much premium seats, and flying less traffic-heavy routes. That's thing Southwest plans to statesman successful 2025 arsenic portion of a turnaround scheme spurred by an activistic investor.

"They're already starting to do immoderate of this," he said. "Instead of conscionable nickel and diming, airlines for illustration Spirit and Frontier are doing much bundling, which is successful statement pinch what we astatine Breeze do, and we've recovered success."

The still-in-service airlines Neeleman founded, for illustration JetBlue Airways, Azul Brazilian Airlines, Canada's WestJet, and Breeze Airways, mostly travel this idea. Neeleman is nary longer a portion of JetBlue aliases WestJet but is main of Breeze and is Azul's committee chair.

JetBlue Airways, for example, now offers lie-flat business class and free WiFi. Breeze has home first-class and reclining coach seats.

Historically, these strategies person been absent from nan likes of Spirit, Frontier, and Southwest, which person stuck to all-economy craft pinch small choice.

Mainline carriers, hoping to support up pinch their growth, flooded nan marketplace pinch heavy discounted basal system fares successful hopes of poaching customers consenting to salary much for an assigned spot aliases much room.

"Basic system outran nan supply, but location are group that will salary up for an upgraded experience, and that's what ULCCs are trying to modify," Neeleman said.

United CEO Scott Kirby besides commented connected nan upsell inclination successful June, saying low-cost airlines are "going retired of business" because flyers favour acquisition complete summons price.

Southwest should thin into change

Southwest has nan other problem, Neeleman said. The hose has a bully compartment product, but alternatively of charging for individual add-ons, he said, it included everything.

"Someone flying pinch conscionable a backpack going to spot their woman doesn't request 2 checked bags but had to return nan afloat checked container fare — Southwest didn't springiness them a choice," he said. "I deliberation group conscionable want choice."

Neeleman sold his first carrier, Morris Air, to Southwest successful 1993, successful what he says was a "different era" successful which nan airline differentiated itself pinch an unconventional civilization and product.

Now, Southwest is connected nan correct way arsenic it responds to unit from nan activistic patient to accommodate to modern times, he said. Starting successful 2026, Southwest plans to delegate seats, thing it said 80% of its customers prefer.

Analysts opportunity nan move could bring successful much business travelers who don't want to conflict for a seat.

Low-cost airlines should proceed to ditch barebones planes

Southwest shouldn't beryllium nan only 1 to move distant from humanities norms.

Neeleman said Frontier and Spirit must proceed adjusting their business models to gain gross and offset precocious operating costs.

In July, Spirit announced caller bundling options and said it would destruct immoderate fees to target much premium customers. More recently, it announced plans successful October to sell astir $500 cardinal worthy of Airbus jets to trim costs and bring successful cash. Shares roseate astir 12% aft nan announcement but are still down astir 84% year-to-date.

"The problem Spirit has is they kept getting bigger airplanes, reasoning if they conscionable adhd much seats, location will beryllium unlimited demand," Neeleman said. "That forced them to overlap pinch different carriers connected already high-traveled routes. They person almost 90% overlap."

He said what makes Breeze much successful is that it is nan sole usability connected astir 85% of its routes, which focus connected niche, underserved markets — meaning nary competition. Breeze besides flies smaller aircraft, pinch its biggest pitchy hosting astir 100 less seats than Spirit's largest, Neeleman said, making them easier to capable and profitable connected routes competitors would struggle with.

Frontier, for its part, has unveiled akin bundling and premium seating options, including a "business class" that blocks nan mediate seat. It is besides restructuring its way map to simplify its web and amended fleet utilization.

Those updates can't footwear successful accelerated capable for Frontier, which revealed lower-than-expected net connected Tuesday, sending its banal value down astir 15%.