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JetBlue founder and low-cost airline veteran explains how struggling airlines need to adapt to survive right now
30.10.2024 - 18:37 / insider.com / David Neeleman / Barry Biffle
Budget airlines are starting to look very different from their traditional no-frills roots. High costs, razor-thin margins, and an evolving travel market have forced them to switch gears.
Low-cost airline veteran David Neeleman — founder of five budget carriers since 1984, including JetBlue — told Business Insider that some of these struggling airlines have failed to adapt to a changing industry, especially in the uneven post-pandemic recovery.
He suggested Spirit and Frontier, which haven't turned profits since 2019, should merge their businesses like Alaska Airlines and Hawaiian Airlines did earlier this year. That is, if they can get it past federal regulators. In January 2024, a judge blocked JetBlue's $3.8 billion deal to buy Spirit.
"I think there is a place for [ultra low-cost carriers] in the market, but Spirit and Frontier had overlapped routes, so they were competing with everyone else and each other," Neeleman said in an interview. "I think if they stop competing with each other, they could carve out a niche, though it won't grow at the same rate as before."
The Wall Street Journal reported in October that Frontier was considering another offer to buy Spirit in a deal that's been on-and-off for years. Frontier CEO Barry Biffle declined to comment on the story during the company's earnings call on Tuesday.
Neeleman also said that Southwest, Spirit, and Frontier could benefit from adopting new money-making strategies, like bundling fares, offering more premium seats, and flying fewer traffic-heavy routes. That's something Southwest plans to begin in 2025 as part of a turnaround plan spurred by an activist investor.
"They're already starting to do some of this," he said. "Instead of just nickel and diming, airlines like Spirit and Frontier are doing more bundling, which is in line with what we at Breeze do, and we've found success."
The still-in-service airlines Neeleman founded, like JetBlue Airways, Azul Brazilian Airlines, Canada's WestJet, and Breeze Airways, largely follow this idea. Neeleman is no longer a part of JetBlue or WestJet but is chief of Breeze and is Azul's board chair.
JetBlue Airways, for example, now offers lie-flat business class and free WiFi. Breeze has domestic first-class and reclining coach seats.
Historically, these strategies have been absent from the likes of Spirit, Frontier, and Southwest, which have stuck to all-economy aircraft with little choice.
Mainline carriers, hoping to keep up with their growth, flooded the market with heavily discounted basic economy fares in hopes of poaching customers willing to pay more for an assigned seat or more room.
"Basic economy outran the supply, but there are people that will pay up for an upgraded experience, and that's
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