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The Spirit Airlines shutdown will ripple through commercial aviation, likely raising higher fares as the budget carrier exits the market, industry experts said.
“Any time you have a reduction in capacity and demand increases, airfares have nowhere to go but up. And that doesn’t count the fares that are already rising because of the spike in fuel prices,” CBS News travel editor Peter Greenberg told CBS News Boston.
Spirit announced early Saturday that it had “started an orderly wind-down of operations, effective immediately,” after efforts to obtain a $500 million federal bailout stalled. All Spirit flights had been cancelled.
Losing Spirit, known for its ultra-low fares, will likely mean costlier tickets on other airlines. A CBS News analysis of Cirium data, a provider of aviation analytics, found average fares jumped 23%, or roughly $60, for a round-trip flight when Spirit exited a route. Overall passenger volume also fell 20% after the carrier left a market.
Spirit’s failure could boost fares at a time when ticket prices are already elevated due to higher jet fuel costs from the Iran war.
What if I have a ticket for a future Spirit flight?
Customers with tickets for future Spirit flights are entitled to full refunds if the airline goes out of business.
Spirit on Saturday said it would automatically process refunds for any flight that was purchased through the airline with a credit or debit card. The airline has set up a website to answer questions regarding its shutdown.
“If you’re holding a Spirit ticket for a flight that hasn’t happened yet, you’ll get that back from your credit card company under federal credit laws,” Greenberg said.
Still, travelers may encounter obstacles obtaining their refunds.
“Watch what happens very closely, and if the airline ceases operation, call the credit card you used to buy the ticket and dispute the charge,” Eric Rosen, director of travel content at The Points Guy, told CBS News. “The result is a non-delivery of service, which is grounds for disputing a charge.”
Spirit customers who paid cash or used airline loyalty points could be out of luck, Rosen said, noting that those points cannot be transferred to other airlines’ loyalty programs.
In Saturday’s announcement, Spirit said that “compensation for guests who booked flights” using a voucher, credit or free Spirit points “will be determined at a later date through the bankruptcy process.”
Still, Julian Kheel, founder of Points Path, advises against canceling a ticket for an upcoming Spirit flight.
“Canceling your ticket now without a promise of a refund will eliminate all protections. Instead, hang on to your ticket and file a chargeback with your bank,” he said.
Other airlines to the rescue?
An abrupt shutdown would mean some travelers may have to turn to other airlines for a flight home. United Airlines said Friday it is “preparing to support Spirit customers and employees” and will provide more details soon. American Airlines also announced steps it is taking to help stranded passengers if Spirit halts service.
“The American Airlines team is prepared to do all it can to support Spirit Airlines customers and team members,” it said in a statement to CBS News. “To help customers whose travel may be disrupted, we immediately implemented fare caps on Main Cabin tickets for Spirit routes where we also offer nonstop service and will continue to support as many customers as possible.”
Such fare caps would limit American’s prices but could still force Spirit customers to pay more than they expected.
“They said they’ll offer rescue fares to Spirit passengers, but it’s unclear if they’ll be offered on every route Spirit served,” industry analyst Henry Harteveldt, founder of Atmosphere Research Group, told CBS News.
JetBlue and Frontier also posted statements saying they are ready to assist affected travelers.
Harteveldt urged customers to keep copies of their Spirit itineraries in case another airline requires them.
“These rescue fares may be less expensive than the normal fares these airlines would charge, but would probably be more expensive than the Spirit fares,” Harteveldt added.
More pressure on fares
Harteveldt said Spirit’s collapse would affect airfares depending on how quickly other airlines fill those routes, but expanding operations could prove difficult before the busy summer season.
“Airlines’ plans have already been committed for the summer. But over time, within three to six months, I would not be surprised to see Froniter, Avelo, Breeze and Allegiant all take steps to enter markets that Spirit served,” Harteveldt said, citing some of Spirit’s low-cost competitors. “I do expect a lot of budget airlines will try to backfill Spirit somehow.”
Kheel said Spirit helped keep airfares in check, even if it wasn’t the most popular with consumers.
“With them soon to be gone, I think we’re likely to see an increase,” he said. “That’s on top of the airfare increases we’re already seeing from the increase in jet fuel prices. This is only going to make that situation worse.”
