[1/7] Passengers wait in the domestic terminal at Hartsfield-Jackson Atlanta International Airport in Atlanta, Georgia, U.S., January 11, 2023. REUTERS/Alyssa Pointer/File Photo Acquire Licensing Rights
CHICAGO, Sept 21 (Reuters) – Travel boom has delivered bumper earnings for U.S. carriers, but no-frills airlines such as Frontier (ULCC.O) and Spirit (SAVE.N) are struggling to return to sustainable profitability.
That has made some of them weigh premium-price offerings, including first-class seats, customer lounges and branded foods even as they expect fares to remain the primary driver for bookings.
Ultra low-cost carriers offer a no-frills experience at rock-bottom fares and charge heavily for ancillary services.
They were tipped to be the big winners after the pandemic, but persistent operational constraints have exacerbated their cost pressures, making it imperative to find new high-margin revenue streams.
Reuters Graphics
With consumers more willing to splurge on travel, demand for premium cabins has gone up. This together with soaring bookings for flights to Europe and Asia have allowed the legacy airlines – Delta (DAL.N), United (UAL.O) and American (AAL.O) – to mitigate inflationary pressures.
Reuters Graphics
Budget carriers lack these products.
Frontier CEO Barry Biffle said while he will not invest in long-haul jets, he has been struck by a greater desire among leisure travelers to pay for first-class seats on domestic flights.
Frontier is watching the trend
Travel boom not enough to drive profits at US budget airlines Frontier, Spirit
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