We Fixed It, You're Welcome - Spirit Airlines Out of Runway: What Happens From Here?

Starting point is 00:00:00 Welcome to We Fixed It. You're welcome. The show where we take over companies, you come along for the ride, and we try to put them back better than we found them. All right, so imagine this. You're getting ready for a plane trip. You pack your bag, drive to the airport, check in, pay the fee to take your bag with you, and get ready to board. But plot twist, there's no plane to get on.

Starting point is 00:00:24 Well, the plane's sitting right there, but the airline that flies that plane, it's no longer in business. Your flight's not delayed. It's not canceled. it's just gone. That can't be right, so you check the company website for reassurance, and it says something like, hello, all flights are canceled, customer service is no longer available, good luck out there. Well, that's exactly what happened to Spirit Airlines customers on May 2, 26. Over the course of one day, Spirit Airlines didn't exactly

Starting point is 00:00:50 shut down mid-flight, but close to it. Could this outcome have been prevented? Maybe not. It's no secret that Spirit has been in financial crisis for a long time. But is Spirit a one-off cautionary tale or a big wake-up call to the airline industry. Could the situation have been handled differently instead of leaving it to customers, now the former employees and competitors to figure this all out? If we were in charge, how would we pick up the pieces? Today, that's what we're fixing. And we're not ticking off just yet. We're lucky to have as our featured guest, Zach Wichter, consumer travel reporter at USA Today. Zach covers aviation and travel and writes the popular column cruising altitude. He's been a reporter for the New York Times and The Points guy,

Starting point is 00:01:30 and was part of the team that earned a Loeb Award for coverage of the Boeing 737 Max Crisis. He's been actively covering the spirit shut down in real time, including what it means for passengers, competitors, and the broader airline industry. So we are definitely going to need him for this. Thank you so much for being here, Zach, and tell us just a little bit more about your coverage for USA Today and what you do. Yeah, it's my pleasure. Thank you so much for inviting me.

Starting point is 00:01:53 And I think my title says it best. I am a consumer travel reporter at USA Today, which means I cover the travel industry, and particularly aviation from the view of the consumer. So I write stories that are targeted at regular travelers like all of us. And that's why I've been paying such close attention to this spirit shutdown because it affected people who were trying to travel. And as the airline reporter, that's my job.

Starting point is 00:02:19 So I'm really happy to have the opportunity to talk to you and also to talk about what it means for travelers going forward because this is a big change in the U.S. airline industry. Thanks, Zach. Yeah, we're really, privileged and glad to have you here with us. See, you got Zach, you got me, we got Melissa here and Chino here,

Starting point is 00:02:38 and we're all going to dig into this fascinating and complicated story about Spirit that's still unfolding in real time as we speak. Melissa, Spirit can just shut down and say, we're done. So many things had to go wrong to get to this point, like stacked on top of each other. How did we get here? Yeah, so let's revisit Spirit Airlines,

Starting point is 00:03:00 because we've actually tried to fix them before. So, and they haven't made this easy. This was our first topic, first episode, first season. Spirit built its brand on ultra low-cost travel, rock bottom fares, and fees for everything else. For a while, that worked. People were excited about that. But post-pandemic, the economy stopped cooperating. They haven't turned to profit since COVID.

Starting point is 00:03:26 And for years, we're openly warning there was substantial doubt. they could survive. So by 2024, as Aaron mentioned, the debt was already really heavy. Then came as second bankruptcy in 2025, which only made things tighter, more obligations, fewer customers, fewer employees. They were trying to reinvent the airline while dragging a model that no longer had enough margin to breathe. And then the collapse. A creditor deal meant to save them quickly, fell apart as fuel costs spiked and assumptions unraveled. Leadership, made one last push for a bailout, and that didn't land. And so on May 2nd, Spirit shut down. Immediately, flights canceled. Thousands of employees are out of work. Passengers are stranded.

Starting point is 00:04:13 Many finding out at the actual airport. And here's the thing. None of this was a surprise. The warning signs were everywhere. Failed mergers, repeated bankruptcies, shrinking operations. Spirit was telling us, in plain size, that this could end badly. But when the moment came, the experience wasn't just bad. It was chaotic. Employees got little to no notice.

Starting point is 00:04:40 I know Chino, you're going to go deep into this, but customers had no clear pack to get help. This wasn't an orderly wind-down. It was a live operational failure dumped on the people closest to the problem. And we've seen this movie before. It's not just in the airlines industry, but the messenger did the same thing in media.

Starting point is 00:05:00 ambitions, rapid hiring, and then a sudden shutdown with employees being blindsided, different industries, same pattern. Companies say we are trying to fix it until the last possible second. But what this really means is we transferred the risk to the employees and the customers. So here's the question we should actually be asking. When a company knows it's in trouble and spirit clearly did, what is the responsibility to communicate sooner, wind down better, and protect the people who didn't make the decision, but have to pay the price. Because this isn't just a spirit problem.

Starting point is 00:05:37 It's a leadership problem, a CX problem, and increasingly a pattern. So Spirit Airlines has been a topic, and we really want to make sure that we've got a fix for the customers and for the future of the employees and the culture. So let's get going. Let's talk about it. Zach, what's your, I mean, you've been hearing about it. Tell us from a consumer, what are they supposed to do?

Starting point is 00:06:05 Yeah. Well, so, I mean, this is the crazy thing, and you mentioned it a little, Melissa. Like, this is just how airlines shut down. This isn't unique to Spirit and it's not unique to the U.S. I've actually gotten caught up in it myself. I want to say it was almost 10 years ago. There used to be an airline based in Germany called Air Berlin. And they had similar to Spirit, very serious financial issues.

Starting point is 00:06:28 and I was supposed to fly home from Germany one day, and I got to the airport, and they hadn't quite gone out of business yet, but my recollection is they also hadn't paid their pilots in a while, and so, like, 300 of their pilots called out sick one day, and so all of their flights got canceled, and I was stuck in Germany. And I think, like, the same thing. There were no customer service people to help us. We were really on our own. And so that's what usually happens in these cases. Customers are left to fend for themselves. And it's really just because the airline completely runs out of money. And so I'm really interested as we talk through this about how that can be resolved or how

Starting point is 00:07:08 airlines can plan for that better. Because I'm used to reporting on the stakes for consumers and what they can do in the aftermath. I haven't delved into the ways that this could be avoided from a wind down perspective. Because usually an airline winds down because they've completely run out of money. They can't purchase fuel and then they're not able to operate their flights. Well, and this is the playbook for the industry and everyone, should we be shocked and appalled? Or have we, like Melissa said, we've seen this before. So is this just how this kind of thing plays out?

Starting point is 00:07:44 And we should all just shrug and say, okay, like, why does this one seem to stand out? So I think we can absolutely be appalled, but we shouldn't be shocked because this is the way that airlines shut down. So when I heard that Spirit was really on the ropes, I was just kind of waiting for this to happen. I think the reason this story has blown up so much, and we talked a little bit about this before we started recording, is just because it hasn't happened in the U.S. in a long time. The U.S. aviation industry, despite all of its problems and, you know, an era of bankruptcies in the early 2000s, has been relatively stable. We really haven't seen a major airline shutdown in decades. And so it's shocking when this happens. It's shocking to see, but the way that it happens isn't shocking because this is essentially how it happens every time, whether it's here in the U.S. or abroad.

Starting point is 00:08:36 You know, I'm going to jump in here, too, because I think we're not shocked. I think that's being very clear to our listeners, right? Spirit is the very first episode we've ever covered. But we saw the signs. And I want to talk about the Worn Act. which is the worker adjustment, recruiting notification. So it's essentially,

Starting point is 00:08:59 if you're a business that has 100 or more employees, you have to legally provide 60 days notice in advance of a mass layoff or something closing down like Spirit did. And the challenge here is they didn't do that. They did not give anybody a warning as we just discussed. People found out on the news on March 2nd or May 2nd. So their claim is, you know, there's an exception to this rule saying, you know, if you have an unforeseeable business circumstance, you don't have to give the 60-day notice.

Starting point is 00:09:35 But we continue to say how not shocked we are that we have covered this. And so legally, this kind of gets into a gray area because people continue to say unforeseeable circumstances, but we saw this a mile away. and I don't think this is going to change in terms of how airline shut down and like the president has been set, but I don't feel like this needs to be the standard. They could have done a lot better. You had 60 days of advance notice that you knew you were going to shut down. May 2nd just happened to be the day you called it, but it's been years ongoing.

Starting point is 00:10:18 Yeah, I would say that there's corporate reasons. responsibility and this is an issue around that, right? What's responsible shutdown protocol? And Tina was a playbook and so there should be a shutdown playbook. I always talk about at companies exiting with grace. I've been at a startup that actually shut down unceremoniously, but I don't think it's the same thing because as Tino said, they knew. And what the issue is is around leadership because the leaders were hoping that they could get that one Hail Mary to work and it wasn't going to. So you would think that behind the scene, the leaders are still scrambling to get the money,

Starting point is 00:11:05 trying to get the funding to get out of bankruptcy, get that framework done. They should really have thought about what is a one-page protocol if we don't get it, right? So what is the plan? What is a way to make sure the people at the airport know what we're going to do, how they're going to get refunded? All of those instructions and protocols needed to be set up and also, you know, engage your employee base. I mean, one of the things that I found really interesting when I was at a startup because we actually had tape over the door, front door we all knock in the back was I had CSRs that were making not that much money, but they cared about the customers.

Starting point is 00:11:56 So they didn't care that we weren't getting paid. So they actually showed up, called the offices and the clients to let them know that we were no longer in existence and what we wanted them to do. And they decided, I mean, I helped them decide. But I also let them know they weren't going to get paid. Well, yeah, and if they didn't know this was happening, everyone else did. Like, it was in the atmosphere. That whole week before, if not months or a couple years before, you know, you saw in the news that Spirit is out runway, right at the end of their runway. But, you know, I said out loud.

Starting point is 00:12:36 Like, I'm glad I'm not flying Spirit this week. And this was days before the announcement. And then the announcement came. So there's, we were, like you said, we shouldn't be shocked. But yet, you know, a major U.S. carrier shuts down in the middle of operations. There's a shock factor to it. And the problem is that they're just kind of washing their hands of it saying, you make of this what you will.

Starting point is 00:13:01 But it's, you know, someone else take the reins from here. And the other airline carriers are kind of happy to step up, right? So we're like, talk about that for a little bit. Like what are the carriers behaving in the wake of like, no, that we're suddenly down one competitor. What are we going to do about this? Support for today's episode comes from Square, the business platform that helps sellers become the best in the neighborhood. Whether you're growing your business or just trying to keep up with it, Square knows what you need. You can take payments, online orders, manage your inventory, staff,

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Starting point is 00:14:00 Well, let's help you out. Square's offering our listeners up to $200 off Square hardware when you sign up at square.com slash go slash we fixed it. Again, S-Q-U-A-R-E dot com slash go slash we fixed it. and set up your business the way it works for you. Visit BetMGM Casino and check out the newest exclusive. The Price is Right Fortune Pick. BetMDM and GameSense remind you to play responsibly.

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Starting point is 00:14:54 They were one of the really, I mean, they were kind of the main ultra-low-cost carrier in the U.S. And so their competitors are really happy to see them exit the market for a couple of reasons. First of all, in the immediate aftermath, there's now this extra demand on the table. And so we saw airlines kind of across the industry come together with rescue. fares to help Spirit Airlines passengers who are stranded. And that's great. And that's going to build those airlines some goodwill because the next step is that these airlines are now going to start competing for that leftover demand. And certainly there are going to be some markets that probably lose air service because Spirit on this ultra low cost model served some airports in secondary and

Starting point is 00:15:41 tertiary communities that may not attract a mainline carrier. But so airlines are going to kind of look at the numbers and figure out where it makes sense for them to go in in markets that Spirit may have been the only airline. But beyond that, because Spirit was an ultra-low-cost carrier, they kind of drove this pressure in the market to lower airfares across the board. So whether or not you've flown Spirit, you've benefited from Spirit Airlines because they helped drive down prices in every market that they touched. Wherever they had to compete with another airline, that airline had to compete with spirit on price. And so now all of their competitors are going to be able to raise airfares. And on the other side, some of the analysts who I've spoken to have said

Starting point is 00:16:29 that these airlines need to be careful about raising their fares too much too quickly because they may cannibalize some of their demand. But pretty much everyone in my reporting is in agreement that we're going to see higher airfares across the board as a result of spirit leaving the industry. Well, and you see that across the, yeah, you see that across different industries. When the economy bottom tier drops out, then there's no more base level option. And then everyone else is kind of free to do what they want. It elevates, and maybe not in a good way for consumers, but elevates the market. If you go to Las Vegas, you know, those little like near adjacent strip hotels that were reasonably priced and no frills.

Starting point is 00:17:10 And those are getting demolished and they're getting replaced by mega casinos that, you know, are more on the luxury elite side. I'm curious, Zach, too, because, you know, we can't talk about May 2nd being just a coincidence of a date, like gas prices, if anyone is looking at that as a huge market indicator. It's insane. We've never hit these levels before in like recent memory. And I know that had to have been a huge factor. There's other airlines have been shutting down services to other places.

Starting point is 00:17:41 And so as we talk about, you know, with spirit shutting down, arises the barrier for entry in terms of price point because there isn't that anchor anymore. What about the other airlines who are saying, okay, so sure, we can raise prices higher, but then also the fact of gas is insane. So we need to also accommodate for that margin loss. So I'm curious, Zach, of what you're hearing from other analysts, are we going to see incredibly expensive airline prices moving forward and that just be the new set standard where you're paying, you know, triple the amount that you would have a year or two go because of the loss of spirit, but also the impact of gas prices. And is that going to just be than that new normal over the next coming, you know, five, ten years?

Starting point is 00:18:35 Yeah. That's a great question, one that's really hard to answer. what I can say kind of in the short term is we are definitely going to see prices go up because of the fuel prices. And you hit the nail on the head when you said that this is kind of the reason that Spirit went out of business. It was because of fuel prices ultimately. Like Spirit had this plan to come out of bankruptcy that hinged on the price of a gallon of jet fuel being, I believe, somewhere in the $2.70 a gallon range. And it's now over $4, maybe closer to $4.7. a gallon, and so they just did not have the cash on hand to operate in this new environment. So, yes, I think airlines are going to have to raise prices to adjust to that.

Starting point is 00:19:23 How long those prices stay elevated will depend on a number of factors. Part of it, obviously, is how long the fuel prices stay elevated. But the other part of it is how much we as travelers get used to those prices. because once our expectations are set to pay a certain airfare, it's easy for airlines to keep them at elevated prices and kind of capture that revenue. One other thing that I think hasn't gotten a lot of attention, but that as we've been talking, I just started thinking about is Spirit also changed the market in a really significant way by causing other airlines to introduce basic economy fairs and these unbundled tickets that were now also used to. to seeing, you know, your checked bag used to be included. Your seat assignment used to be included. And now basically all airlines in the U.S. have at least some tickets where you don't have those inclusions. And that was a direct result of their need to compete with Spirit and other airlines

Starting point is 00:20:25 like Spirit. And so as part of all of this, I'm really interested to see if other airlines see a spike in their basic economy ticket sales. I think that'll be an indicator of being able to see where Spirit's demand kind of goes, post-Spirit Airlines. But I think that in general, we're just going to see higher airfares for the foreseeable future for like because of a number of different factors. What makes me really sad about this entire thing is that the consumer who is the heart of all of these businesses is not really considered in that. Because Zach, I loved like, you know, Spirit, Southwest, they all were kind of that low fare, you know, Ryanair. They're all like that low fare thing. You know you can't even bring your purse. You've got to pay $20 for that. So I get it,

Starting point is 00:21:18 but I also wonder like, you know, going forward, how are we going to understand like what that business model should look like? Because to your point, and we've seen this in other industries, We've seen this in all different types of brands. There's a lot of people that will still pay. Yeah. And you get to a certain point where how do you take a family of four to go visit cousins in Michigan? You know, maybe you don't do that anymore. You have to start cutting things out.

Starting point is 00:21:51 And if there's enough of a consumer pushback and the airlines, you know, the industry sees a significant drop just because they price themselves out of a reason, even if they have to, for to be viable. there's going to be a drop in the industry. So, yes, the business travelers that can expense it and fly their weekly routes, they're not going to see a difference, but the everyday consumer will. And they can raise rates by 30% and then drop them by 5% and say, fair sale, you know, we might fall for it. But that would be a big, you know, that's a big burden, economic burden, to make up as a consumer and say, oh, don't worry, we'll float it for you.

Starting point is 00:22:32 We'll just dig deeper into our pockets for the same roots we've always flown. And we'll pay more for your base, bare bones, nothing included service. That's a tough pill to swallow. Yeah. Never fall for a fair sale. Airline pricing is so opaque. Like there's just no real way to know if things are actually on sale. I hate writing about airline pricing because it's so confusing.

Starting point is 00:23:00 Even to me, and I've been doing this, like I said, for almost 10. 10 years. You just never know. Like, even other experts who I talk to, I'll say, how do you know when you're getting a good deal? And the answer that I invariably get is if you feel like you're getting a good deal, you should book the ticket. That's a hot tip, Zach. That's a very hot tip for our listeners. So don't just jump in. And I, and I'm on all of the airline, you know, different sales is ready to jump in. So we went to Japan because we felt. like we were getting a good deal. We talked to people.

Starting point is 00:23:35 It sounded like it. But it's interesting going back to this consumer behavior and kind of that pendulum swing. I think, you know, for the purpose of today's episode, spirit is dead. We know that. We tried to fix them before.

Starting point is 00:23:50 They should have listened to us. And I think this episode is really kind of a cautionary tale for the future of airline and what others should do. And I think there's two aspects of that, right? everybody hates. Like I think that's, you know, Zach, you can tell us more than anything, hates this bundle approach. I don't want to have to pay $20.

Starting point is 00:24:13 I'd rather that be included in the pricing. And if you're going to raise a premium to cover the margin on the, you know, complete, wonky gas prices that we're having right now, I don't want you to also then charge me another $200 optically versus putting it in the price. And so I think airlines are going to need to start looking at, A, is your consumer, your everyday consumer going to be the people that we're, you know, going on spirit? Probably not right now as gas prices are so high. But I do think there's a world where we can cater to the folks that are okay to pay a little bit more and what that can look like. And I'd be curious to explore what's next and what's the learnings for.

Starting point is 00:25:02 future airlines. Yeah, so airlines are already doing this a little bit and it's really interesting because you have this bucket of extremely price sensitive consumers who like everyone will say in a survey that they want their stuff to be included and that they're willing to pay a little bit of a premium on their ticket if it means they get to check a bag, that they get a meal or something like that. But airlines have seen in their actual booking behaviors that that does not bear out. And so, So like people say that they want to pay extra, but then when it actually comes time to make the purchase, many people don't want to pay extra. What airlines have gotten really good about is having different ticket bundles available. And so there's this way where you can have these unbundled tickets and then they have like the next tier of tickets that has X, Y, and Z included. And they do tend to see a fairly good return on people buying up to the next tier. You hear that in their earnings report. kind of all the time.

Starting point is 00:26:04 So going up a tier sounds good in theory, but when you're already paying multiples or a giant leap from what you used to pay just for a seat on the plane, you know, and you're still in third class, you're in steerage on the Titanic, you're somewhere, you know, way at the bottom of the, of the, you're just lucky to be there.

Starting point is 00:26:26 Are you going to pay more for, you know, economy minus to have an inch more leg room and they got a snack when it's passed around. Like, are those perks weren't paying anything? And, you know, did they have a perceived value to the consumer who's already reached deep to pay just to be on that plane? When you're a mid-sized business, you need every competitive advantage you can get. Like an AI solution that works for you, not against you. SAP Grow is built with AI embedded at its core, working across every system.

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Starting point is 00:27:37 Spotify advertising. You're among fans. Yeah, I mean, people are paying, right? So that's the other really crazy thing about the travel environment right now is the demand for premium travel is stronger than it's ever been. Airlines are investing in retrofitting their cabins

Starting point is 00:27:56 with more business class and other premium seats because that's the demand that's been strong. And that was actually another part of Spirit's problem, is they catered to the budget traveler, who, you know, the budget traveler is an important part of the traveling ecosystem. But since the pandemic, the demand has not been the same

Starting point is 00:28:18 as what Spirit built its model on. People since 2020 have been willing to spend more on travel. Travel is seen as one of the bigger splurges now. people are willing to scrimp and save in other areas of their life so that they can splurge on their travel. And so that is another part of the struggle that Spirit was up against is the demand for premium travel and people's travel budget recovered much faster than other areas of the economy following the pandemic. And that trend has held so far. And in fact, that's why we saw Spirit introduce some things like extra legroom seats and some of these other more premium amenities. They've always, or at least for a long time, have had what was called the big front seat, which was a first class style seat.

Starting point is 00:29:06 So you got a little more room. And they actually sort of pioneered that among the low-cost carriers. But I believe they were also working on introducing extra legroom, like standard economy seats in their cabins. And so they were trying to compete with more premium carriers in the same way that these more premium airlines were trying to compete with them. You know, when we talk about spirit and we talk about the airlines in general, you know, loyalty programs are a huge deal. So, you know, Zach, when you were speaking to this, it made me think about that because in a sense, I would say as a business traveler, you're probably a platinum loyalty program. Well, you know, in theory, let's just say that. So like something like spirit going down is not necessarily something you care about because you're probably always flying with your carrier using your points, getting upgrades, getting all the amenities, getting a signed seat free care, you know, free baggage checked, whatever.

Starting point is 00:30:15 So, you know, in these types of situations like a spirit that has maybe a loyalty program or, you know, you're paying for those perks, you're, you're basically. basically out of it. And so, you know, when companies are having to go through something like this, how do they consider their loyalty programs as collateral and, you know, as actual dollars? Because, I mean, like if you had 100,000 miles in the bank, that's worth something. And I mean, I'm thinking about it in terms of like, you know, if, you know, I would want that. And if that company's gone away now, like, it's not getting, you know, does it get transfer to something? Southwest, does it get transferred? You know, there are some of those rules that we've had in the past where they've actually allowed for that. But I'm just wondering like, you know, loyalty is

Starting point is 00:31:08 in a free perk, you know, so now it's out the window. So I love that idea too. And just kind of going back to like a solve. So yeah, if you were a Spirit Airline loyalist and you had 100,000 points in the system, which actually equate to money, I think would be really. smart for another similar budget airline to partner and say, listen, I see a huge opening in the market here in terms of share and new customers that can be loyal to me. So we're going to actually honor or give a discount or something. If you can say you had 100,000 points, we're going to transfer this to, you know, X amount of points for Southwest or whatever the carrier could be. because for you as a business, you know that this person had to have done a lot of flights to get to that point.

Starting point is 00:32:00 You want them to be flying with you. And I think that is a really great opportunity for other airlines to look at. I think for spirit to, you know, get any good spirit, sorry, with your loyal customers. And this is like a parting gift, a way to actually help your brand if whatever, the future. because we've seen it a lot where brands die and then, you know, they come back as something new. And if there's any hope for that, I think that would be a really great way to uphold some brand care or recognition there. I also think that it's this all goes back into how you make people feel. And that goes into what we're talking about, you know, paying for the extras.

Starting point is 00:32:52 I don't want to have to pay for the extra from paying a premium, right? And so although it's for $5, it's the fact that you're asking can be a challenge. And I think for airlines, and I know Zach's reassured, people are moving back into the, you know, giving you the full bundle. Looking at that and, you know, adding these loyalists to your team could be a great kind of future playback to use. Yeah. So Chino and Melissa, you'll both be very high. happy to hear that a lot of airlines are already offering status matches for Spirits, frequent flyer elite members. Typically, when an airline goes out of business, the frequent flyer miles do disappear. And so they're not sort of seen as currency in the same way as actual dollars.

Starting point is 00:33:42 I will say that when airlines merge, their frequent flyer programs also usually merge. And so in a merger situation, you don't lose that value. When an airline, airline goes out of business, there isn't anything backing the value of those points. And so the points do go away. But as I said, a lot of airlines are now offering status match. So if you had status in Spirits' frequent flyer program, you may be able to get that transferred over to another airline that's trying to get you as a customer. I'll also note that I reached out to Bank of America who issues Spirits co-branded credit cards. And those credit cards are still eligible to make purchases. So they don't stop working just because the airline went out of business. They'll no

Starting point is 00:34:26 longer generate points in Spirit's frequent flyer program because the program no longer exists, but you can still use the card. It's still, you know, safe and protected. And Bank of America may reach out to customers who have those cards about transferring to another product. So you may be able to move over into another card within Bank of America's points ecosystem. And so there are some opportunities here, especially around those most frequent flyers, because those are people who other companies, they really want to get that business. Well, we said that, and it's good that the airline, you know, they're self-serving, but yes, it's good that they're stepping in and saying come to us and we'll take care of you

Starting point is 00:35:04 and, you know, be part of us now. But we've said that the ultra-low-cost carrier, we've still got Frontier for as long as they're own, but Southwest is trying to get out of the budget discount arena also. We said that it's gone for the foreseeable future because it's tied to gas prices and labor costs and escalating costs everywhere. But let's just for a moment, is it gone or did it create a market opportunity for someone to come in and say, just look at it a whole different way and say, look, we've got efficiencies. We've got alternate fuel methods. We've got. We've got. new technology, whatever it is,

Starting point is 00:35:46 did it create this vast open marketplace for someone to come in with some financial muscle behind them and say, we're going to be the new ultra cost carrier. We figured this out. We've been watching it observing. You know, we put together this brain trust of airline industry experts and, you know, adjacent experts from technology and transportation and global might, the powerhouse board, you know,

Starting point is 00:36:12 of all the best of the best. We figured this out. Did this just create a vacuum that someone else can step into and say, it's not dead. We're going to own this entire category. This spring, denim gets a softer, lighter update. Introducing Old Navy's drapey denim wide leg, a new fit that moves with you. It's everything you want denim to feel like for summer.

Starting point is 00:36:36 Easy, breathable, and effortlessly cool. With a fit that creates natural movement and a wide leg that feels modern, not overwhelming. Plus, that signature, wait, for this price, moment. Old Navy's drapeed denim wide leg. I do think that there's a growth opportunity for a lot of low-cost carriers now. Certainly, Frontier is well positioned to grow. I also think JetBlue, which has had some of its own financial struggles, maybe in a better position now without spirit to compete with.

Starting point is 00:37:05 And we've seen some other low-cost carrier upstarts in the last few years, like Breeze, Airways, Avello, Allegiant, which has been around for a little bit longer, but these airlines may be able to position themselves now to say we can do what Spirit wasn't able to. So that's definitely something that I'm watching as an airline reporter to see how some of these existing competitors kind of respond to what's gone on with Spirit. And also, you know, maybe it does leave an opening for a new entrant into the market who maybe has a slightly different business model. I think probably Breeze is the one that stands out the most to me just in terms of trying to do things a little bit differently. And that was founded

Starting point is 00:37:47 by David Nealman, who founded JetBlue, so he has a long history in the airline industry. We'll see what they do with this opportunity. Well, and I think that, you know, spirit being a cautionary tale, it's really important that we also think about the employees because they were left with nothing. And I think that, you know, we've talked about this happens time in time, again with companies that are going down and sinking like the Titanic. So can you come up with a better model and plan and framework that can protect the rights of your oil employee as well as your company? I, you know, I was just going to bring this up. No, so thank you for sharing this, but we knew what was happening. And I think if we use the example of Titanic, right, the ship is going

Starting point is 00:38:40 down, but there are life for us people can get off of. We don't love a mass layoff. We don't love when this happens. But if this means not get into a point where you have to completely shut down operations, let's start letting people go earlier, giving people the opportunity to say, hey, come May, Q2, we're wrapping up. You should start looking for places ahead of time. Here's the severance that we can pay you. We're going to stop having people buy tickets for our airlines. And again, I know cash flow is a problem. It's going to say a problem. If you know you are shutting down completely, you should have had a plan about this. Gas has continually gone up the last few weeks, months. The one day notice is not acceptable. And I think this is a cautionary tale of how

Starting point is 00:39:38 other aliens can look at it and say, let's do better for the people that are there. Because at the same time, if I was those budget competitors, I would look at scooping up the people that were here because we know that Spirit has also gone through mass layoffs. And those people that remained probably were their top talent. And so is there an opportunity to scoop some of those up, bringing them into, you know, more premium airlines, whatever the case. may be, but I do think Spirit should have thought about their team more than just saying, we're going to shut down, knowing that this was, the train had already left. You could have done more earlier. I kind of want to think about this from a slightly different angle, and I'm interested to hear what you guys think of this take, because I think that the problem with an airline

Starting point is 00:40:34 shutdown and the reason that we see it happened so abruptly is because they really do just run out of money. And they can't pay their bills, they can't buy their fuel. And I don't know how you get out of that situation or how you anticipate exactly when it's going to happen because the price of oil is volatile and you just don't know where it's going to go. I wonder if the fix to this is actually on the bankruptcy side

Starting point is 00:40:58 where creditors get preference in the bankruptcy payouts if they are able to support a longer runway. So once you hit that point where the company is out of money, then creditors have to chip in some amount of money to help the operations wind down in an orderly way in order to stake their claim once the bankruptcy proceedings start. So I don't know, maybe that's just a different way of doing it, that there's a way to kind of leverage those creditors who are calling in their debts and make those debts contingent on them supporting an orderly wind down. Listen, so Canadian here, we have like three airlines. We do not have the options that you deal down south. And the, you know, Air Canada had run into challenges as well. And the government had to step in because that's it.

Starting point is 00:41:51 We don't have that many others. The challenge here, Aaron and Zach, I think with this is who would be incentivized other than creditors? So I love that idea because it actually says, you want the money? do the right thing. And maybe that's a government, you know, forcing that to happen. It's America. I don't know how much that's, that oversight is going to happen to be frank. But I do see a world where, you know, you can't predict that the gas was going so high, but you could have predicted through mapping out and financial planning that, yeah, you didn't have to 2027. You were always going to shut down at this time. The cash has run out. We can see it. It just keeps going.

Starting point is 00:42:38 So you should have put a date in place because it was going to always be this year. It just happened sooner than you would have anticipated. And then speak to your creditors and hold them accountable and say, okay, we know this is coming down. How can we shudder down more effectively versus this overnight thing? Because again, you were not lasting by the end of the year. regardless of how much gas is right now. And I think it was their responsibility to take care of their team a lot longer, knowing that this was happening. It just happened a little quicker, but it was always going to happen.

Starting point is 00:43:15 And I think using creditors for that is a really smart idea, Zach. Yeah, thank you. I do just want to say, though, just to like counter you a little bit, Chino, like it may not have happened this year if gas hadn't gone so crazy. Like, I remember a couple years ago when, like, first, the spirit frontier merger and then the spirit jet blue merger didn't go through. People were talking about, is this the end for spirit? And that was like two years ago. And they continued on. So like, I think there are ways and it's really important that companies find ways to do better by

Starting point is 00:43:51 their employees. But I don't think that they're necessarily malicious actors in that way. Like, I don't think that they're trying to pull the rug out from under their employees' feet. And I also, like, think that if they had a clear end date, that they would have been able to plan for it better. Like, my impression from covering these things and seeing it in my own travels is just like, it really does kind of happen abruptly for an airline in a way that's hard to plan for. Because, you know, managers do in their own way care about their employees. Well, and if they, that's interesting if they had an end date, let's say they're very public. And they announced it six months or how to cast.

Starting point is 00:44:32 were ceasing operations based on all our current projections, would they have the passenger load for those six months? Like, would people keep flying this airline that's out of money? And it's just inevitable? Like, would they lose their entire passenger base for that time that they depended on to make it six months? Because in that case, they'd have to shut down the next day anyway. So did they have a choice about how visible they were in transparent they were being

Starting point is 00:44:58 versus just the sudden polar rugs use of operations. I wonder about that. Well, we got to fix it. That's what we do here. We're not going to, I don't think we're going to resuscitate spirit. That's not our job. We tried that once. We gave them a couple years to write the ship.

Starting point is 00:45:17 So it's a done deal. They're going away unless there's an 11th hour, Hail Mary type of situation where someone brings serious capital to this, like real capital. And for whatever reason, they're this champions of spirit. And they've got spirit tattoos from back in the day. And they're just like ride or die for spirit. I don't know who those people are.

Starting point is 00:45:38 But they might be out there. There might be people, you know, investors that just see the upside. And they're willing to throw money at the problem. But let's assume it goes away. We were saying that they had time to at least internally prepare. So at least internally get their people right, get their, you know, make retirement plans, make sure that one pilot wasn't stranded from one flight to the next and make sure that maybe the week of they're starting to be vocal and transparent and create these continuity flights from one airline to another. Because people probably, they were to raise questions, but if you got rebooks from Spirit to American, the week of this transition, people would have handled that. that would have been okay with that.

Starting point is 00:46:27 So crisis, maybe more crisis management leading up to the moment, knowing that, you know, if they called this out as inevitable six months or so ago and said, guys, we're out of money, keep flying us, that probably wouldn't have done very well for the six months worth of revenue that they needed to sustain that promise. But if they had managed the crisis better in the moment, the week of and started to do just get the operational side in order, get the messaging in order, bring on the PR crisis team, bring on the creditors to help buffer and create, you know,

Starting point is 00:47:07 make everything right in the moment and make sure that people are taking care of, make sure they can get home, make sure that employees who have been loyal for decades or however many years that spirit's been around have a parachute somewhere to go within the industry. that is all of a sudden saying, wait, there's a surplus of talent out there. What are we going to do about that? If they had been more responsible, they'd have a better legacy. And maybe, you know, brands don't ever go away forever. Toys v. Us comes back as some online subsidiary.

Starting point is 00:47:39 You know, they just, they'll be around. Maybe Spirit will come back on day. And the best than they can do right now is preserve that legacy so that it's got a monetary value. So someone else could pick it up. And Spirit in five, ten years might be. a really appealing carrier and everyone's going to say, oh yeah, well,

Starting point is 00:47:56 they went through that hurdle before and now look, they've got this new investment company behind it, they've got new technology, they've got, they're doing interesting things with the fuel that it's not as dependent on the market rate anymore. It can come back. So if

Starting point is 00:48:12 we're able to make all that happen and goodwill it into existence, Melissa, do we fix it? I think we did. All right. Thanks, Melissa. So, you know, knowing we can't fix spirit, like bring it back, but can we, you know, everything we put with what happens from this point on, can, did we fix the situation? Did we make everything? Do we alleviate a little bit?

Starting point is 00:48:34 Is it better than when we first came into this? I think with the news act of partnerships, I like the idea of holding creditors more accountable. And like this week out closure plan, just in terms of the people side, having a bit more human touch there. I think this is, we're not fixing spirit today. We might hear about them. Maybe we'll do this in five years. We'll have another episode on them.

Starting point is 00:49:01 But I think for other budget airlines, you know, forecast, the price of gas is probably going higher. This war is not over yet. And so this is also an opportunity for you, if you have some cat flow, to look at, you know, maybe acquiring other smaller budget airlines and, you know, putting forces together so that you can avoid this. And although it's not as great for the consumer, kind of taking a little bit of a note from Canada where we only have a few airlines. So maybe you only have a few budget airlines

Starting point is 00:49:41 in this time where gas is super high. And then what we can correct that again, you know, hopefully we see more competitors. But right now, I think people need to like stick their head down, get past this hopefully small blip, and can learn from Spirit. All right. Thank you, Chino. Well said, Zach, we gave it our all. Do we do some good here? Yeah, I mean, listen, the airline industry is super complicated.

Starting point is 00:50:10 There are a lot of variables, as we've all agreed. We're not resuscitating Spirit Airlines. I don't think it's going to be flying again, probably ever. but I do think that the airline industry is going to come out stronger from this, especially in a time when prices are going up, industry consolidation helps with less competition. The airlines that still exist are more likely to be able to balance their budget sheets. And for the consumer, I think, you know,

Starting point is 00:50:40 we talked about some good ideas and for things that the company can do, other companies may be able to do if they have to wind down to make that process a little less abrupt and a little less chaotic, both for travelers and for their employees. So hopefully someone's listening and can put some of these ideas into action. Good point. Thank you, Zach. All right, well, that's going to wrap up our Spirit Airlines episode. We are cleared for landing before we go. I want to give a big thank you to Zach Wifter of USA Today. Zach, please let everyone know how we can keep up with your column, your coverage of Spirit Airlines, and whatever else we need to know before we ever go anywhere again.

Starting point is 00:51:19 Yeah, absolutely. So I write for USA Today. All of my articles are at USA Today.com. My email address is Z. Wychter at USA Today.com. Or you can follow me on most socials at Z L. Wichter. Fantastic. Thank you, Zach. Thank you, Melissa. Thank you, Chino. Thank you to you, our listeners. When you're getting ready for your next trip, whether you're flying first class or standby, don't just check your ETA. Check the financials and make sure your airline. will still be in business. Otherwise, that round-trip ticket might just be a one way. But wherever you're headed next, save travels, and we will see you next time. We hope you enjoyed this episode if we fixed it, you're welcome. We go into every episode somewhat cold, and nothing we say should be construed as legal advice, financial advice, or anything that would get us in trouble. All trademarks, IP, and brand elements remain property of their respective owners.

Starting point is 00:52:15 Hey, y'all, it's Kelly Clarkson with Wayfair. Ever order furniture online and wonder what if? What if it doesn't hold up? That sofa was four days old. You should have ordered from Wayfair. With Wayfair, there's no what if. Just style you love and quality you can trust. Visit Wayfair.ca. Wayfair, every style, every home.

We Fixed It, You're Welcome - Spirit Airlines Out of Runway: What Happens From Here?

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