Budget Airlines Want to Become Your Premium Travel Option

It hasn’t been the smoothest ride for low-cost airlines in recent years. They are less profitable than they were before the pandemic, and travel preferences have changed.

That’s why the likes of JetBlue (JBLU), Southwest (LUV), and Spirit (SAVE) are trying to capture customers with new services that promise a more premium experience. But can that really work for the budget business model?

Pivot to Premium

Ever since the pandemic, budget airlines have had the fasten seat belt sign on. These carriers have historically outperformed in turbulent times, but that hasn’t been the case lately. Labor shortages, supply chain snags, and inflation have pressured their ability to keep prices low.

Meanwhile, demand for premium options has soared. Covid changed how Americans want to travel, with higher prices stoking an increased appetite for comfort. So it makes sense for budget airlines, which often weather criticism for disagreeable accommodations, to try to meet this growing demand.

But they face several substantial headwinds. Spirit and Frontier (ULCC) see high levels of passenger dissatisfaction, according to American Customer Satisfaction Index data, and that sentiment could prove difficult to shake.

Then, of course, there’s the elephant in the economy cabin. Premium offerings could potentially lead to higher fares across the board — a challenge to these carriers’ core appeal.

Rising Demand for Ultra Low Cost

The rise of premium options doesn’t mean budget travel is going anywhere. Ultra low-cost airlines have actually seen sales and traffic increase since the pandemic as the cost of travel overall has increased. It appears travelers either want to spend more on more comfort, or want to spend as little as possible to still be able to travel in a more expensive world.

But the growing demand hasn’t kept pace with supply even as those carriers increased their capacity. And premium fares probably won’t help with that.

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