US Ultra-Low-Cost Carriers:
The Great Unbundling

Spirit, the pioneer of the US ULCC model, spent 2010-2020 as one of the world's most profitable airlines. A "perfect storm" precipitated its collapse: Pratt & Whitney engine defects grounded ~20% of its fleet for mandatory inspections, the DOJ blocked the JetBlue merger on antitrust grounds, and cost convergence with legacy carriers eroded Spirit's historic CASM advantage.

The November 2024 Chapter 11 filing involved $100M in DIP financing, rejection of 87 aircraft leases, and exit from numerous markets including Albuquerque, Boise, and Birmingham—a 25% capacity reduction year-over-year.

While Spirit faltered, Frontier executed a successful strategic pivot returning to profitability after four years of losses. The "New Frontier" strategy fundamentally rethought the ULCC network model.

The "Out-and-Back" model ensures aircraft and crews start and end their day at the same base, eliminating expensive overnight accommodations and generating $100M in annual cost savings. "UpFront Plus" premium merchandising captures small-business travelers with blocked middle seats, significantly boosting unit revenue without capital expense.

Allegiant views itself as a "travel company" rather than an airline, connecting underserved small cities (Toledo, Sanford) directly to leisure destinations. The "Low Utilization" anomaly defies standard economics—parking planes on low-demand days (Tuesdays/Wednesdays) and flying intensely during peaks prevents flying empty just to keep aircraft moving.

The Sunseeker Resort vertical integration attempt became a financial albatross with construction delays and cost overruns, resulting in a massive Q4 2024 impairment. However, the core airline business remained healthy with 7.7% adjusted operating margin.

Minneapolis-based Sun Country operates arguably the sector's most resilient model using a single 737-800 fleet across three distinct business lines: scheduled leisure service, charter operations (DoD and NCAA teams), and Amazon Prime Air cargo under a strategic partnership operating 12 converted freighters.

This "three-legged stool" creates counter-cyclical stability. Charter contracts are long-term and insulated from fuel fluctuations. Over 28% of revenue comes from non-scheduled service, protecting against the fare volatility that crushed Spirit.

Founded by JetBlue/Azul creator David Neeleman, Breeze distinguishes itself with "Nice, Nicer, Nicest" product segmentation avoiding adversarial "gotcha" fees. The A220-300 fleet enables "long and thin" routes—connecting city pairs like Providence to Los Angeles with ~137 seats rather than 180.

The "Breeze Ascent" premium cabin features 2x2 recliner seats with 39" pitch and high-speed WiFi, capturing high-yield leisure traffic that Spirit and Frontier cannot. Breeze achieved its first profitable quarter in Q4 2024, generating over $200 million in quarterly revenue.

Founded by former Allegiant executive Andrew Levy, Avelo applies the Allegiant model to different geographies—igniting service at dormant secondary airports near major metros (New Haven instead of JFK; Wilmington instead of Philadelphia).

Operating used 737-700/800 aircraft with low capital costs enables profitable low-frequency schedules. In late 2024, Avelo strategically exited its Burbank base to consolidate East Coast operations around New Haven—achieving profitability within four years of launch.