JetBlue founder of what airlines like Spirit and Southwest should do

• Budget airlines like Spirit, Frontier and Southwest are struggling to make a profit.
• Low-cost veteran David Neeleman told BI that Spirit and Frontier must merge to survive.
• He said Southwest and others must respond to changing times and give customers more choice.

Budget airlines are starting to look very different from their traditional, no-nonsense roots. High costs, razor-thin margins and an evolving travel market have forced them to make the switch.

Low-cost airline veteran David Neeleman — founder of five budget airlines since 1984, including JetBlue — told Business Insider that some of these struggling airlines have failed to adapt to a changing industry, especially in the uneven post-pandemic recovery.

He suggested that Spirit and Frontier, which have not made a profit since 2019, should merge their companies as Alaska Airlines and Hawaiian Airlines did earlier this year. That is, if they can get it past federal regulators. In January 2024, a judge blocked it JetBlue’s $3.8 billion deal to buy Spirit.

“I think there is a place for (ultra-low-cost carriers) in the market, but Spirit and Frontier had overlapping routes, so they were competing with everyone else and each other,” Neeleman said in an interview. “I think if they stop competing with each other, they can carve out a niche, even if it won’t grow at the same pace as before.”

The Wall Street Journal reported in October that Frontier was considering a new bid to buy Spirit in a deal that has been on and off for years. Frontier CEO Barry Biffle declined to comment on the story during the company’s earnings call on Tuesday.

Neeleman also said Southwest, Spirit and Frontier could benefit adopting new strategies to make moneysuch as bundling fares, offering more premium seats and flying fewer routes with heavy traffic. That’s something Southwest plans to start in 2025 as part of a turnaround plan spurred by an activist investor.

“They’re already starting to do something with this,” he said. “Instead of just nickel and diming, airlines like Spirit and Frontier are doing more bundling, which is in line with what we’re doing at Breeze, and we’ve had success.”

The still-operating airlines that Neeleman founded, such as JetBlue Airways, Azul Brazilian Airlines, Canada’s WestJet and Breeze airwayslargely follow this idea. Neeleman is no longer part of JetBlue or WestJet, but is head of Breeze and chairman of Azul’s board of directors.

For example, JetBlue Airways now offers reclining business class and free WiFi. Breeze has premium domestic and reclining coach seats.

Historically, these strategies have been absent from brands like Spirit, Frontier and Southwest, which have stuck with full-economy aircraft with little choice.

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The major airlines, hoping to keep up with their growth, flooded the market with deeply discounted economy base fares, hoping to lure away customers willing to pay more for an assigned seat or more room.

“The basic economics are outpacing supply, but there are people willing to pay for an enhanced experience, and that’s what ULCCs are trying to change,” Neeleman said.

United CEO Scott Kirby also commented on the upsell trend in June Low cost airlines are going bankrupt because flyers prefer experience over ticket price.

Southwest should lean on change

Southwest has the opposite problem, Neeleman said. The airline has a good cabin product, but instead of charging for individual extras, he said: it included everything.

“Someone flying to their girlfriend with just a backpack doesn’t need two checked bags, but had to take the full checked bag fee — Southwest gave them no choice,” he said. “I think people just want choice.”

Neeleman sold his first airline, Morris Air, to Southwest in 1993, in what he says was a… “different era” in which the airline distinguished itself with an unconventional culture and product.

Now Southwest is on the right track as it responds to activist company pressure to adapt to the modern age, he said. From 2026 Southwest plans to allocate seatssomething that 80% of its customers prefer.

Analysts say the move could attract more business travelers who don’t want to fight for a seat.

Low cost airlines should continue dumping barebones

Southwest shouldn’t be alone in moving away from historical norms.

Neeleman said Frontier and Spirit must continue to adjust their business models to generate revenue and offset high operating costs.

In July, Spirit has announced new bundle options and said it would eliminate some costs to target more premium customers. More recently, it announced plans in October to selling about $500 million worth of Airbus jets to cut costs and raise cash. Shares rose about 12% after the announcement, but are still down about 84% this year.

“Spirit’s problem is they’re getting bigger and bigger planes because they think if they just add more seats there will be unlimited demand,” Neeleman said. “That forced them to overlap with other airlines on already busy routes. They have an overlap of almost 90%.”

He said what makes Breeze more successful is that it is the sole operator on about 85% of its routes focus on niche markets that are underserved – which means there is no competition. Breeze also flies smaller planes, with its largest plane having about 100 fewer seats than Spirit’s largest, Neeleman said, making them easier to fill and more profitable on routes where competitors would struggle.

Borderfor its part, has unveiled similar bundle and premium seating options, including a “business class” that blocks the middle seat. It also restructures its route card to simplify its network and improve fleet utilization.

Those updates can’t start soon enough for Frontier, which revealed Tuesday’s earnings were lower than expected, sending the stock price down about 15%.