Spirit Airlines Just Collapsed. Should Europe's Budget Airlines Be Scared?

Added: 2026-06-01

[00:00:00]Spirit Airlines actually collapsed. On May 2nd, the airline canceled every flight, shut down every customer service, and told passengers not to come to the airport after 34 years. That's [music] it. I never actually flew with them, but I've of course seen the memes, and I've flown with enough low-cost airlines around the world to get the picture. Now, if you don't follow aviation that closely, you might look at Spirit's demise and think, "Okay, American Airlines goes bust. Not much to do with anyone else." But, the reasons Spirit collapsed are actually really specific. And when you start looking at Europe's budget [music] carriers through the same lens, the picture gets quite interesting. What I want to do in this video is go [music] through exactly what went wrong at Spirit, pull out the five things that actually killed the business, and then run those same five things [music] against the big European low-cost airlines: Wizz Air, easyJet, Jet2, Ryanair, and see who's exposed and who isn't. Some of the answers genuinely surprised me.

[00:01:06]>> [music] >> Right. So, Spirit. To understand what happened, you need to understand the business model. Spirit was what the industry calls an ultra-low-cost carrier, a ULCC. The idea is that you strip the base fare down to basically nothing, and then you charge for everything on top. Carry-on bag, seat selection, a bottle of water. I'm not saying it how the Americans want me to say it. All paid extras. And for a long time, this was incredibly profitable.

[00:01:37]The margins on those extras were huge.

[00:01:40]Someone pays $40 for a ticket, and then another 80 to bring luggage. It sounds ridiculous, but the numbers really worked. The problem started when the big US carriers, Delta, United, and American, looked at this and went, "Actually, we can just do that." They launched basic economy fares, the same stripped-back product except you're on a major airline with connections, a loyalty program, lounges if you want to pay for them. Spirit's entire reason to exist just got replicated by airlines with 10 times the scale. So, Spirit tried to merge. First with Frontier and then with JetBlue. The JetBlue deal was a big one. It would have given Spirit access to premium passengers, a real loyalty program, the whole northeast corridor. The Biden administration's DOJ blocked it. A judge agreed and Spirit was on its own again with no path to any kind of premium revenue. That's super important because Spirit had no business class, no real loyalty program, no holiday packages. The only money coming in was base fares and bag fees. And those margins were getting thinner and thinner every quarter. They didn't really have a fallback. Spirit filed for bankruptcy first in November 2024, came out in March 2025 with a restructuring plan, and that plan was built around jet fuel costing about $2.24 a gallon. Take a look at this. By May 2026, jet fuel 4.51.

[00:03:09]The Iran war started in February. The Strait of Hormuz basically closed.

[00:03:14]Roughly 20% of the world's oil supply got disrupted and fuel prices doubled in a few weeks. Airlines with hedging programs where you have contracts to lock in fuel prices cheaper earlier rode it out. Spirit had almost no hedging in place. They filed for bankruptcy a second time in August 2025, tried to get a $500 million bailout from the Trump administration. The creditors said no and that was it. [clears throat] So, if you pull it apart, five things came together. Margin compression from bigger airlines copying the model, no premium revenue to fall back on, a blocked merger that would have solved that, a heavy debt load. Spirit lost over 2.5 billion between [music] 2020 and it shut down. And no fuel hedging, right when the worst fuel crisis in aviation history hit. Those five things.

[00:04:03]>> [music] >> And the question is, how do Europe's budget carriers look when you test them against the same list? Before we get into the ones that are still flying, it's worth saying that Europe has already had its own casualties. Play Airlines, the Icelandic low-cost carrier that launched in 2021, as basically a Wow Air reboot, shut down in September 2025. Same kind of story. Thin margins on transatlantic routes through Reykjavik, a market too small to support multiple carriers, losses every single year. When demand softened, there was nothing left.

[00:04:38]>> [laughter] [screaming] >> Iceland has now watched three budget airlines trying to make cheap transatlantic flying work. And at a certain point, it stops being about the airline and starts being about the model. The next one is Norse Atlantic. I can't wait to deep dive into that on another episode. Norse Atlantic is technically still flying, but barely.

[00:05:01]They've launched a strategic review, which is corporate language for looking for a buyer. They've had to raise 110 million dollars through a rights issue, taken 70 million dollars in a bridging loan, pulled out of Los Angeles, and just this month they cut a third of their office staff and continued furloughing staff. I'm honestly going to do an entire video on Norse soon because the story there is fascinating. And to be honest, it's one of my favorite airlines, so I'm really surprised to see it in this position. If you're interested in that, please consider subscribing to the channel. It's completely free and it really helps me out. Okay, the big four. Wizz Air is the European carrier that structurally looks the most like Spirit. Same ultra low-cost model, same philosophy, strip the fare, charge for everything else.

[00:05:43]And it's a big operation. Over 230 aircraft, 63 million passengers last year. Bases all over Central and Eastern Europe, but there's a lot going on underneath. The engines are the big one.

[00:05:55]Wizz Air's entire fleet runs on Pratt & Whitney GTF engines. Ask me if I know what that means, I do not. But what I do know [music] is that those engines have a serious defect. A powdered metal contamination issue that's been forcing inspections and repairs across the whole industry. At its worst, [music] Wizz Air had nearly 60 aircraft grounded at the same times. Right now, it's still around 38. To put that into context, that's roughly one in five of their planes just sitting on the ground, not earning any >> [music] >> revenue, still costing them money. And this isn't really a quick fix. Wizz Air themselves have said they don't expect the full fleet back until the end of 2027, maybe 2028. Each engine repair takes about 300 days, and Pratt & Whitney's maintenance capacity is completely overwhelmed. You'd be right to wonder why Wizz Air would stick with them after all of this. And the CEO actually addressed this. He compared it to a marriage. There's ups and there's downs. They've just placed another massive order for the same engines.

[00:06:53]Sounds like a marriage that needs some therapy. The financial hit has been significant. Take a look at this.

[00:06:58]Operating profit dropped 62% last year.

[00:07:01]Unit costs, excluding fuel, went up nearly 20% from the inefficiency of having that much of the fleet parked.

[00:07:08]Moody's downgraded [music] the credit rating. Fitch did, too. Then there's the Eastern Europe exposure. Wizz Air had big operations across Russia-adjacent markets. Three aircraft are still physically stuck in Ukraine. Routes had to be restructured or dropped completely. That hit Wizz Air harder than any other European low-cost carrier. Now, I don't think Wizz Air is about to go the way of Spirit. They've still got cash reserves north of 1.7 billion euros and a compensation deal with Pratt & Whitney covering some of the grounding costs. Their core markets in Poland, Hungary, and Italy are strong. But in terms of the Spirit comparison, margin compression, limited premium revenue, a massive engine problem eating into the capacity, falling credit ratings, and geopolitical disruption, Wizz Air is the one that most closely mirrors [music] those structural risks. If fuel stays high and the engine situation drags on, this is the one to watch. EasyJet is in a really different position, and I think the reason is something that doesn't get talked about enough, EasyJet holidays.

[00:08:09]This is the bit that changes the whole picture. Last year, the holidays division of EasyJet alone made 250 million pounds in profit, up 60 million on the year before. And now they've upgraded their target to 450 million pounds by 2030. They're going well beyond ancillary revenue from bag fees.

[00:08:28]It's a proper parallel business selling package holidays, flights, hotels, transfers, all bundled. Spirit had nothing like this. When fare pressures squeeze Spirit, there was nowhere else to make the money. EasyJet has an entire second business generating [music] a quarter of a billion in profit that literally doesn't care about base fees.

[00:08:48]The other thing is airports. EasyJet flies out of Gatwick, Luton, Milan Linate, a whole network of slot-constrained airports where getting a landing slot is genuinely really difficult. That's a structural moat. A competitor can't just show up and undercut you there if literally there aren't any slots available for them to operate. The constraint [music] is the advantage. Overall, the numbers look solid. Group revenue topped 10 billion pounds for the first time. Profit was up 9% to 665 million pounds. They're sitting on an undrawn 1.7 billion dollar credit facility. Is there pressure? Of course. Airline revenue per seat kilometer fell 3% last year as they invested in new routes. The fuel crisis is real. But, against the Spirit checklist, EasyJet has a diversified business that absorbs shocks in a way that pure low-cost carriers can't really do. The holidays division is doing a lot of the heavy lifting. The next one is really interesting. Most people outside of the UK haven't heard of Jet2. Well, they haven't at all. It blew up on TikTok or something.

[00:09:52]And honestly, I think that's partly why the business works so well. It's not trying to be the biggest or the cheapest. It sells package holidays to British families going to the Mediterranean. [music] And there are a lot of British families going to the Mediterranean. It's like a hallmark of growing up in the UK. Spain, [music] Greece, Canary Islands. What a time to be alive. And the numbers behind it are pretty remarkable. Record first-half revenue of 5.3 billion pounds. Cash reserves of 3.35 [music] billion. That's an extraordinary number for an airline of this size. Operating profit 715 million. A new base at Gatwick opening for summer 2026. Over 75% of next year's fuel already hedged.

[00:10:33]And they've just launched another 100 million pound share buyback. Because apparently, there's not enough to spend the cash on. Jet2 passes every single one of the Spirit tests. Revenue comes overwhelmingly from package holidays.

[00:10:46]It's so diversified by default. Debt is low, fuel hedging is well ahead, and the competitive position in UK leisure travel is tough to attack. Jet2 has spent years building a customer service reputation that none of the pure budget carriers can match. If Spirit shows you what happens when a budget airline has no safety net, Jet2 is the version where the entire business is the safety net.

[00:11:12]Which brings us to Ryanair. I recently did a video on why Ryanair is so successful, even though the reputation would have you feel like it's not. If you haven't seen that, check it out after this. I'll leave it in the description. There is a reason I've saved this for last. Michael O'Leary was at an investment conference in Oslo recently, and essentially said that European airlines could go bankrupt if fuel stays at $150 a barrel through the summer. You could read that as a warning, but I think it's more of a positioning exercise. What he's actually saying is, "We'll be fine. Everyone else should be worried." And the numbers make that kind of hard to argue with. Let me run through them quickly. They've locked in their fuel prices well in advance.

[00:11:50]So, while other airlines are paying whatever the fuel costs today, Ryanair agreed months ago to pay roughly half that. That alone is a massive advantage when prices are this volatile. 84% of this financial year hedged at $77 a barrel. 80% of next year at $67 a barrel. Their credit rating is one of the strongest of any airline [music] in Europe. They're sitting on over 2 billion euros in cash. And this is the one I find really interesting. Ryanair owns every single one of its 643 aircraft outright. No loans against them, no lease payments. Most airlines are essentially renting their planes.

[00:12:30]And when business gets tough, those payments don't stop. Ryanair doesn't have that problem. When your competitors are still paying expensive monthly bills on planes that are grounded with broken engines, that gap in cost gets very wide very fast. First half profit was up 42% to 2.54 billion. They're buying back 750 million euros of their own shares. And they're planning for 300 million passengers a year by 2034. On every single metric that killed spirit, Ryanair sits at the opposite end. And the thing about Ryanair is that it doesn't only survive when the market gets difficult. It actually benefits.

[00:13:10]Every airline that cuts routes, every carrier that folds, that's market share for Ryanair to pick up. The difficult environment is what widens their advantage. So, should Europe's budget airlines be scared? I think the honest answer is kind of depends entirely on which one you're talking about. The fuel crisis has exposed something that was already true. The ultra low-cost model only really works when fuel is cheap. If you're running on thin margins with no contingency, no hedging, and no alternative revenue streams, a fuel spike becomes more than a headwind.

[00:13:43]Spirit proved that. Play proved that.

[00:13:45]Norse is dealing with it right now. But the carriers that diversified, the ones that built holiday businesses, locked in fuel contracts, paid down their debt, and secured airport slots that are hard to replicate, they are pulling further and further ahead through this. Not suffering. The lesson to be learned here shouldn't be that budget flying doesn't work. It's that budget flying without a backup plan doesn't work. And that right now, the fuel crisis is testing everyone's backup plan at the same time.

[00:14:14]Like I said, I'm going to do a full [music] deep dive on Norse Atlantic soon. The business model, the Indigo wet lease pivot, all of it. Subscribe if you want to see that. If you made it to the end, I appreciate you so much. Thank you so much for watching. I'm Jordan. This is Miles Ahead. Don't forget to like, share, subscribe, comment. See you on the next one.

[00:14:33]Safe.