The Corporate Disaster coming to U.S. aviation
United States-based airlines, including United, Delta, American, JetBlue, Spirit, and more, are falling apart. Due to fuel price volatility, airlines are projecting billions of dollars in losses this quarter and next, and some airlines internally project bankruptcy. Spirit filed for bankruptcy for a second time and is likely to liquidate its assets soon. All other carriers are projecting similar, and this disaster is costing consumers. Fuel surcharges, bag costs, fares, and seat selection rates are increasing while the airlines are reducing mileage earning.
This is shown for JetBlue when watchdog JonNYC shares, “You know, JetBlue’s in a really tough spot. They really are. They, you know, I think I told you this last week, but when Jamie Baker, who’s an analyst for JP Morgan, came out with his estimates for all the airlines based on 450 fuel, two bucks, it showed JetBlue losing $1.3 billion this year. That would probably put them, you know, into bankruptcy, I would assume.” Baker is widely regarded in the industry, and her projection reasonably reflects the surcharges implemented. United Airlines CEO Scott Kirby has made his desire to acquire JetBlue very clear. He is waiting for greater certainty before buying JetBlue and is rumored to be buying American Airlines(which will be touched on later in this article). In the meantime, he is trying to influence government officials not to stop him when it is time to buy JetBlue. JetBlue founder Dave Neelman says that “[T]hat would also take them to $9 billion in debt. Today, they’re paying over 600 million in interest on that debt, bringing the total interest closer to $800 million. So that’d be tough. There’s some thought out there that United’s just doing this with American to clear the decks to buy JetBlue, but I know it from a pretty good source inside of United that they’re very concerned about JetBlue’s debt. And they’re not really interested in taking on that. So I think JetBlue has very few options,” and he also says, “I don’t think Southwest is interested in them. I know Alaska isn’t.” So their best hope, he thinks, is Spirit to go out of business and fuel to get back to $2.50 a gallon. That barely puts JetBlue’s “nose above the water.” United, American, Delta, and JetBlue are raising bag fees by $5-10 each due to rising fuel costs and lower demand.
Spirit Airlines is about to shut down, leaving many slots available at key markets. Bloomberg reports say that Spirit could be liquidated within the next week. They hold many aircraft, gates in Chicago, slots at LaGuardia, and 27% of 2025 capacity at Fort Lauderdale. This is bad for consumers because they will lose their points, and Frontier will be the main budget carrier, leading to higher fares.
United is continuing to make aggressive changes and using manipulation tactics as its strategy. United introduced new premium fares without miles earning and lounge access, and is launching new products, as I covered earlier this month. United is continuing its pattern of manipulation by claiming to buy American Airlines to pressure government officials to buy out or merge with JetBlue. There is zero possibility that American and United could legally merge, and it is unlikely but possible for United to merge with JetBlue. Kirby will try to buy American, fail under antitrust law, then merge with JetBlue, and government officials will be less likely to claim antitrust because they already did it once and don't want to be seen as targeting United. American was rejected for a merger with JetBlue a few years ago, and United will likely be as well.
All airlines are increasing baggage fee costs. Differences are $5-10 granted fuel cost increases. Fares are rising due to fuel costs, and fuel surcharges are being added to tickets.