Four months ago, we published an analysis as part of our Aircraft Intelligence Monthly on the early signs of stress in the low-cost space. Leading into 2024, the U.S. industry was still grappling with an undersupply. That undersupply rapidly ended after the peak 2024 summer season.

There were signs.

The above chart simply tracks the number of departures by day for both Spirit and Frontier along with the seven-day moving average. In highly technical statistical terms, we call it “squiggles around a line”.

In the 24 months leading into the fall of 2024, those squiggles existed. They always exist to some extent since their height reflects the day-of-week seasonality. It’s the same reason you’re more likely to find a lower fare on Tuesday or Wednesday - demand for travel is lower on those days (you’re welcome, if that wasn’t already obvious).

No problem. Discount the mid-week flights and make money around the weekends, right? Remember that for the ultra-low-cost airlines like Spirit and Frontier, each flight brings in another $68 per passenger from the ancillary fees. Besides, you already own the aircraft, so it’s better to get some revenue as long as it covers the fuel, maintenance, and labor costs for the flight.

Only, what if you can’t discount enough? What if there is no price that will attract enough flyers, even with $68 in ancillary revenues, to pay for the labor, wear, and gas?

The answer - more squiggles!

More and more of the Tuesday and Wednesday flights get cut, while the busy weekends continue to fly at full capacity. The weekly low in departures greatly diverges from the weekly high. But then Saturday starts to show similar problems, and some flights can’t cover the variable costs.

Meanwhile, leases on those new 240-seat A321neos still need to be paid. Banks and lessors are funny like that. They don’t care if the airplane doesn’t fly on Tuesday. They get paid for Tuesday, regardless.

“Yeah, but what about Allegiant?” you may be thinking to yourself. And it’s a fair point. Allegiant is king of the squiggles. There are times in Allegiant’s history when no airplanes moved on Wednesdays. It wasn’t a bug; it was a feature. So why was it a good thing for Allegiant and a bad thing for Spirit and Frontier?

Because Allegiant had/has cheap airplanes - notably cheap used airplanes. They cost quite a bit more in fuel and maintenance to fly, but they were also the cheapest airplanes to park when there was no demand. It’s the great irony of Allegiant’s success. Nobody could NOT fly airplanes cheaper than Allegiant (except for maybe Delta’s even-more-ancient DC-9 fleet).

Consider that an old A319 may cost Allegiant $2,500 a day in ownership costs to not fly on a Wednesday, but Spirit was likely to be on the hook for up to $15,000 a day for a new A321neo that only lost more money when it did fly.

And that’s why the squiggles hit differently for Frontier and Spirit than for Allegiant. In April, we highlighted this trend to our subscribers, not as a sign of trouble for Frontier or Spirit - that cat was already well out of the bag by then. But this methodology can be used to find other airlines seeing first signs of stress by being able to fill low-demand flights.

Of course, we all know what happened to the Spirit side of this story - the squiggles went away entirely.

It’s these types of nuances we look for to identify early changes in the market. These little clues are everywhere when you start looking. We follow all sorts of unorthodox trends - like, say, an aircraft shortage that will inevitably end at some point. What are some of the early signs that would suggest the market is nearing equilibrium? That’s the kind of thing we identify for our research subscribers.

To complete the soft pitch, we’re adding more context and options for our subscribers. Each analysis is now accompanied by a deep-dive video explaining its nuances and why it highlights an important competitive edge in today’s market.

Additionally, we’re now making our charts available for purchase as PowerPoint slides to be redesigned and formatted into our customers’ branding. A true slide library, where clients can pick the slides off the shelf and use them in their own presentations.

We don’t often talk about the new products we’re building, mostly because we’re busy building them or working on bespoke projects.

Speaking of which, time to get back to it.

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