Spirit, the Symbol of U.S. Low-Cost Airlines, Exits After 34 Years Amid High Oil Price Shock

U.S. Budget Carrier That Created the "Spirit Effect"
Ultra-Low-Cost Model Helped Lower Fares
Potential for Higher Fares in the Long Run

Due to the Middle East war that has lasted for two months, international oil prices have surged into the $100 range, resulting in the shutdown of a U.S. low-cost airline for the first time in 34 years. Analysts say that the airline was hit by high oil prices even before it could recover from the revenue shock caused by COVID-19.

On the 23rd of last month (local time), Spirit Airlines passenger planes were waiting at Hollywood International Airport. Photo by Reuters Yonhap News Agency

According to the Associated Press on the 3rd (local time), Spirit Airlines, a budget carrier known for its ultra-low-cost fares, announced on the 2nd that it would cease operations. All remaining flights have been canceled, and customer service will no longer be provided.

Employees also lost their jobs overnight. The company had a total workforce of about 17,000 employees, including both full-time and part-time staff.

The company, which has undergone bankruptcy twice in the past, stated that it could no longer continue flight operations due to the recent surge in oil prices triggered by the U.S.-Iran war. In a statement, Spirit Airlines said, "We are proud of the impact our ultra-low-cost model has had on the industry over the past 34 years. We had hoped to continue serving our customers in the future."

U.S. Secretary of Transportation Sean Duffy announced that United Airlines, Delta Air Lines, JetBlue Airways, and Southwest Airlines are offering one-way flights at $200 for a limited period to passengers holding Spirit Airlines reservation confirmations. The airlines plan to support passengers and employees who are stranded at airports or in unfamiliar locations after Spirit Airlines suspended its operations.

The Trump Administration considered a government bailout to prevent the bankruptcy of Spirit Airlines, but no agreement was reached. Secretary Duffy said, "The government cannot always inject $500 million on short notice."

Spirit Airlines played a role in lowering fares at airports where it operated. According to the New York Times (NYT), economists referred to this as the "Spirit effect." Even when operating at a reduced scale, the company played a significant role in keeping market prices low. Robert Mann, an airline industry consultant, said, "Prices in the low-cost segment are determined by competition, and with Spirit gone, it will be easier for other airlines to raise fares."

On the other hand, some expect the impact will not be significant, noting that Spirit Airlines had already reduced its scale of operations considerably and was filing for bankruptcy for the second time in two years. Michael Boyd, an aviation consultant at Boyd Group International, said, "By the time Spirit Airlines suspended operations, it was no longer a major player," adding, "Half of its aircraft were not flying and had already been sold."

This content was produced with the assistance of AI translation services.