United Airlines CEO Scott Kirby said struggling no-frills rivals such as Spirit and Frontier are on a path to “going out of business” because of their poor customer service.
The outspoken Kirby called out the airlines for their “flawed business model” — which draws passengers with ultra-low fares and then slaps them with charges for oversized carry-on bags that are sometimes higher than the plane ticket.
He pointed to Frontier’s reported initiative to offer bonuses to gate agents who flag oversized carry-ons so they can charge passengers an extra $99.
“You can do it once, but you don’t get to do it to them twice,” Kirby told The Air Show podcast on Monday, which was first reported by Business Insider.
“And those airlines grew big enough that they actually need repeat customers.”
A JD Power 2024 survey found that customers ranked Frontier and Spirit last and second to last, respectively, among 11 North American airlines.
“They haven’t treated customers right,” Kirby said.
Kirby said that Frontier CEO Barry Biffle is “dead wrong” with his recent comment that “lowest cost always wins.”
“Best service always wins,” Kirby said.
The US Department of Transportation said that Spirit and Frontier had the highest rate of customer complaints among domestic carriers in 2023.
When was asked what he thought the future holds for ultra-low cost carriers, Kirby said: “I think they’re going out of business.”
The Post has sought comment from Spirit and Frontier.
Despite the shaky balance sheets that are plaguing Spirit and Frontier, Kirby did give the two airlines credit for shaking up the industry.
Passengers “want the lowest price, and they’re willing to have a disaggregated price,” Kirby said.
“So, we needed to build a basic economy cup.”
United’s no-frills fares, like those of its low-cost rivals, include no carry-on fee. Passengers who buy them are not permitted to change the ticket or cancel.
Spirit recently dropped all change and cancellation fees while Frontier dropped fees for all non-basic economy fares.
Earlier this year, Spirit CEO Ted Christie said the airline industry in the US was a “rigged game” designed to benefit the “Big Four” — United, Delta, American and Southwest — while “the long-term losers” were American flyers.
“Today, nearly all the profits of the entire US airline industry are concentrated in just two companies, while the smaller non-legacy carriers scrambled to restore profitability in what seems ever more like a rigged game,” Christie said in an earnings call with analysts.
Frontier, the Denver-based ultra-low-cost carrier, has failed to report a profit in three of the last four quarters despite a travel boom.
Frontier’s struggles, along with some other discount carriers such as Spirit, has some analysts raising questions about their business model.
Frontier’s shares have fallen 32% since early March. Last year, the company’s stock lost 47% of its value.
Biffle pinned the blame on excess industry capacity in key leisure markets that has depressed airfares.
Frontier’s fare revenue per passenger fell 22% in 2023 from the previous year.
Spirit forecast a loss in the second quarter as its earnings continue to reel from the grounding of a number of its aircraft as well as bloated industry capacity in key markets.
Since Jan. 1, Spirit shares have fallen by more than 75%. Earlier this year, a federal judge blocked a $3.8 billion merger with JetBlue.
Spirit’s inability to make money in an era of high demand for travel has raised questions about its ability to manage debt that is due to mature in 2025 and 2026.
The company said it has had “constructive” discussions with its bond holders and is aiming to have a resolution this summer.
Like Frontier, Spirit’s earnings are also hurting due to excess capacity in key markets, forcing the airline to discount heavily to fill planes.
