Death of Spirit: a low-cost airline without the low costs (government should break up airport monopolies?)
Spirit is dead. I flew Spirit a few times and especially enjoyed their “Big Front Seat”. One flight out of FLL, I think, was delayed for hours due to a delay of the incoming plane on a perfect-weather day. Why can’t we have competition among airlines as they do in Europe and a wide range of low-cost carriers? First, Spirit was low cost to consumers, but it didn’t have low costs. Labor is the largest cost for an airline and Spirit’s union labor costs were similar to what the biggest airlines pay (ChatGPT):
ChatGPT on total cost for low-cost Ryanair vs. originally-low-cost JetBlue:
ChatGPT claims, incredibly, that Europe has more secondary airports:
I don’t think that this is correct, since the U.S. has tons of general aviation airports with long runways. Maybe the answer is that U.S. airports are monopolized, e.g., Massport owns both Logan Airport and Hanscom Field, the most obvious competitor for airline service to Boston. Massport isn’t going to undercut its own fees. A single port authority in NY/NJ owns LGA, JFK, EWR (Newark), TEB (the Teterboro airport for the Gulfstream crowd), and SWF (Stewart, too far from NYC unless a high-speed rail were built). There is more competition in Greater Los Angeles and the air carrier airports are owned by different agencies (LAX, LGB, BUR, SNA, and ONT are owned by their respective cities/counties).
Grok:
[in Europe] Many airports are privatized or compete aggressively for traffic, offering incentives to new carriers. US major airports have higher fees, complex slot controls (often grandfathered to legacies), and fewer viable low-cost alternatives near population centers. This raises barriers for new entrants or ultra-low-cost models
All publicly owned U.S. airports are paid for with federal tax dollars, e.g., from taxes on airline tickets, taxes on charters, and taxes on general aviation fuel (the one time that billionaires pay tax, according to Elizabeth Warren?). The Feds can’t seem to break up the airline oligopoly using antitrust laws and, in fact, may have contributed to our high-fare immiseration by blocking a JetBlue-Spirit merger (NYT: “JetBlue Airways and Spirit Airlines announced on Monday that they would not seek to overturn a court ruling that blocked their planned $3.8 billion merger. The decision is a big win for the Biden administration, which has sough to limit corporate consolidation.”; for the record, my first thought regarding the merger was that it shouldn’t be allowed because U.S. airlines were already far too concentrated). Maybe a good starting point would be to break up airport ownership. The five above-mentioned NY/NJ airports would have to be owned by separate competing government entities. Massport couldn’t own both Logan and Hanscom. Palm Beach County couldn’t own PBI/DJT and North County (F45; approved for a runway extension in 2024, but because the U.S. is incapable of working at Chinese speeds, construction isn’t even dreamed of before 2027). Miami-Dade County couldn’t own five airports (“Why do I own five airports? Because I couldn’t afford six.”).
Maybe robot 50-seater airliners would disrupt the market and enable some new carriers to thrive between city pairs in which a secondary airport isn’t owned by the same public agency that owns the main airport. But until “Big Airport” monopolies are broken up, it seems as though incumbent carriers could block most competition merely via a cozy relationship with each of the big airport authorities.
Meanwhile, let’s see how idiotic my investing advice has been. Back in 2010 I wrote “Unions and Airlines”, in which the take-away for investors is not to buy airline stocks because the unions will harvest any additional profits rather than the benefits flowing to investors.
Grok:
Airline stocks have significantly underperformed the S&P 500 since 2010 (roughly early 2010 through early May 2026, or ~16+ years). The S&P 500 (tracked via SPY total return, including dividends) delivered approximately +536% cumulative return, or roughly 12.0% annualized CAGR. In contrast, a broad airline index like the NYSE Arca Global Airline Index (^XAL) rose only about 70% on a price basis (from ~35.7 to ~60.5), equating to roughly 3.3% annualized price-only CAGR—and even adding typical dividends, the sector lagged dramatically behind the S&P 500’s total return (which compounded to roughly 7.8x your money). … Over a more recent ~10-year window (roughly 2015–2025), most major airline stocks delivered minimal gains or outright losses, while the broader market soared.
ChatGPT:
Since 2010, airline stocks have generally underperformed the S&P 500, despite some spectacular rebounds in individual years. … A cleaner “airlines as a sector” benchmark is JETS, the U.S. Global Jets ETF, but it only started in April 2015, so it cannot measure the full 2010 period. Its sponsor reports a 10-year annualized market-value return of only about 0.25% and a since-inception annualized return of about 0.38% as of March 31, 2026. That is dramatically worse than the S&P 500 over the same broad period. … If you cherry-picked Delta or United in 2010, you did pretty well, but still roughly trailed the S&P 500. If you bought airlines broadly, or bought Southwest, American, JetBlue, or JETS, you massively underperformed.
The investment story is consistent with the industry economics: airlines can have good earnings cycles, but shareholders have repeatedly been hit by fuel spikes, recessions, labor cost resets, aircraft shortages, fare wars, bankruptcies, pandemic shocks, and the need to constantly reinvest capital. As businesses, airlines can be necessary and sometimes profitable; as long-term compounders, they have mostly been inferior to owning the broad U.S. equity market.
Note “labor cost resets”!
Let’s close with a shout-out to Spirit for apparently having no serious accidents during its decades of operation, though one pilot may have died from toxic fumes, a known vulnerability with the Airbus. According to Wokipedia:
November 11, 2024 – Spirit Airlines Flight 951, an Airbus A320neo (registered as N966NK), was hit by multiple bullets on final approach into Port-au-Prince, Haiti after a flight from Fort Lauderdale, Florida. A flight attendant was grazed by a bullet and the flight diverted to Santiago de los Caballeros, Dominican Republic.
(This reminds us that (1) Haiti is a wonderful place and that only racism can explain Donald Trump’s negative attitude toward the nation, and (2) no migrant from Haiti can be sent back to Haiti due to the extreme risk of being killed.)
The last ACARS message:
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