Low-Cost Airlines Are Pursuing Upscale Markets

It seems like just about every airline these days wants to be a high-flyer.

Low-cost airlines are going premium, following the rapidly growing household wealth among upper-income people, according to a report in Fast Company.

Frontier Airlines organized its fares into four bundles in May, with buyers of higher-priced tickets getting extras such as priority boarding, more legroom and checked bags. Frontier also dropped ticket-change or cancellation fees except for the cheapest bundle.

Spirit followed in August with similar moves such as blocking middle seats and charging passengers more for the comfort of aisle and window seats. More recently, however, losses, mounting debt and the collapse of merger talks with both Frontier Airlines and JetBlue led Spirit to announce Chapter 11 bankruptcy in November 2024, from which it expects to emerge in early 2025.

JetBlue Airways, which began flying more than 20 years ago as a low-cost carrier, but with amenities, is cutting unprofitable routes and bolstering core markets, including in the Northeast and Florida. As well as delaying deliveries of $3 billion of new planes.

And starting next year, Southwest Airlines will toss out a half-century tradition of “open seating” in which passengers pick their own seats after boarding the plane. That’s after executives said extensive surveying showed 80% of customers preferred an assigned seat, especially among coveted business passengers.

While it’s not clear why demand for premium products and experiences has grown so rapidly, figures on wealth offer one explanation, according to Southwest CEO Robert Jordan, who was quoted in the Fast Company article. The top one-fifth of U.S. households by income have added $35 trillion in wealth since 2019 and holds nearly nine times the wealth of the middle fifth, per Federal Reserve data. Which gives the wealthiest households plenty of money to spend on premium travel.

On the other hand, more crowded planes post-pandemic might also be pushing passengers to spend more to escape a middle seat in the back of the plane.

Whatever the reasons, executives from Delta say they expect sales of premium tickets to surpass the airline’s revenue from main-cabin tickets by 2027. And while Delta’s CEO Ed Bastian says he doesn’t see the “low-end carriers” segment ever disappearing, he also says that upscale moves by ultra-low-cost carriers are having no effect on his airline.

Even though Delta mainly targets upscale travelers, the airline also introduced basic-economy fares a decade ago when discounters emerged as a growing threat to poach some of Delta’s customers.

Which could just show how circular these sorts of patterns really are.

Brand idea for Frontier Airlines: ‘A value however you fly.’

Frontier Airlines could lean into these trends through, for example, “Airport Better Value Guides.” Web and social media content could provide information on the best dining, retail, ground transportation or hotel values in and around Frontier destination airports. Highlighted options could demonstrate a combination of competitive pricing and quality customer experiences. And show a willingness to look beyond obvious choices, to include independent or family-owned businesses, for example.