Suddenly it’s a good time to be a vacation traveler
The coach passenger is king — perhaps for the first time ever — as airlines scramble for a larger share of the booming leisure travel market.
What's happening: As the pandemic wanes, major carriers that traditionally make most of their money off premium business travel have shifted their attention to wooing vacationers.
- Meanwhile, discount carriers famous for selling cheap seats to popular destinations are beefing up to defend their turf.
- The winners: consumers itching to visit family and friends, or explore the country, after being stuck at home for two years.
Driving the news: Spirit Airlines and Frontier Group are merging in a $2.9 billion deal that will create the fifth-largest U.S. airline.
- The two carriers are known for their rock-bottom prices and no-frills service — not to mention consumer complaints about add-ons for everything from reserved seats to carry-on baggage and snacks.
- They said in a statement that the deal would save $1 billion a year for consumers through lower prices and create "America's most competitive ultra-low fare airline."
The combination of the country's two largest budget carriers will help them compete against American, Delta, United and Southwest, which together control about 80% of the U.S. air travel market.
- Rather than layoffs, the companies said they expect to hire another 10,000 workers by 2026, on top of their existing 15,000 employees combined.
The merger could have far-reaching consequences by promoting lower fares for leisure travel, industry experts say.
- "You'll see a shift in how they compete for those clients and that could be a good thing for leisure travelers," says Anthony Jackson, leader of Deloitte’s U.S. airlines practice.
- "It’s rare to see this kind of consolidation be a positive for consumers," said David Slotnick, who covers the airline business for The Points Guy.
Where it stands: Airline fares adjusted for inflation remain 18% below 2019 levels, while overall U.S. inflation is up 6% from 2019-2021, per Airlines for America data.
- Jet fuel prices have risen sharply during that period, but so far, airlines are not passing on the extra cost to passengers.
The big picture: Leisure travel has recovered more quickly from the pandemic slump, which is why the ultra-low-cost carriers — Allegiant, Frontier and Spirit — have grown the fastest, while big carriers like Delta and United are still lagging.
- Spirit's first-quarter travel capacity — measured in available seat miles — is up 21.8% over the same period in 2019. Frontier is up 26.6%, while Allegiant is up 28.9%, according to Cirium data published by Airlines for America.
- Delta, meanwhile, is down 16% and United is down 17.3% compared to pre-pandemic capacity.
Between the lines: Big carriers have sought to capitalize on the leisure rebound by adding more direct flights to popular vacation destinations like Florida, the Caribbean and Western ski resorts.
Yes, but: With stronger competition from a combined Frontier-Spirit, "this is a lever they won’t be able to pull as easily next time," says Slotnick.
- Meanwhile, two new low-cost airlines catering to leisure travelers, Breeze and Avelo, have also popped up during the pandemic.
What to watch: The Frontier-Spirit deal could face pushback from the U.S. Justice Department, which sued to prevent a domestic alliance between American and JetBlue — arguing that the agreement would drive up prices and reduce competition.
Editor's note: This story originally published on Feb. 8.