Ultra-low-cost carriers like Spirit Airlines create competitive pressure that drives down airfares across the entire industry; when such carriers exit the market, their competitors can raise prices because the competitive constraint is removed, leading to higher airfares for consumers.
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Flying is about to get even more expensive, and here is exactly why.Added:
So, whether or [music] not you've flown Spirit, you've benefited from Spirit Airlines because they helped drive down prices in every market that they touched. [music] Their competitors are really happy to see them exit the market for a couple of reasons. There's now this extra demand on the table. And so, we saw airlines kind of across the industry [music] come together with rescue fares to help Spirit Airlines passengers who were stranded. And that's going to build those airlines some goodwill because the next [music] step is that these airlines are now going to start competing for that leftover demand. Because Spirit was an ultra-low-cost carrier, they drove this [music] pressure in the market to lower airfares across the board. Wherever they had to compete with another airline, [music] that airline had to compete with Spirit on price. And so, now all of their competitors are going to be able to raise airfares. Pretty much everyone in my recording is in agreement that we're going to see higher airfares across the board as a result of Spirit leaving [music] the industry.
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