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We love traveling for nearly free with miles and points earned from the best travel credit cards. But snagging super cheap paid tickets on low-cost airlines can be (almost) equally thrilling.
There’s a lot of shakeup going on with low-cost airlines these days. Icelandair announced this month they’ll be purchasing low-cost carrier WOW Air. This still needs to be approved by Icelandair’s shareholders.
This is familiar news. Primera Air closed business suddenly in October, Norwegian Airlines has started negotiations to be possibly absorbed by British Airways, and Alitalia is being bid on by easyJet and Delta.
So why are all of these airlines starting to struggle when air travel is at an all time high?
What Is Going on With Low-Cost Airlines?
Obviously there is a lot of nuance when it comes to something as complicated as the airline industry. Everything from international laws to the condition of the world economy affects airlines.
But here are 3 factors that hurt low-cost airlines more.
1. Lack of Profit for Those Cheap Seats
Most travelers are getting into air travel because of incredibly low airfare in coach. However, the profit margins for coach seats are very low. Airlines make the bulk of their money when travelers pay for premium seating.
Recently, airlines have been adding Premium Economy seats to their planes because as it turns out, these can be the most profitable seats. With Premium Economy seats, you’re paying extra, but the extra expenses aren’t nearly what they would be for Business or First Class.
Of course you could just pay for premium seating with frequent flyer miles and get the best of both worlds!
2. Competition for the Comfy Seats!
Premium seat competition is at an all time high. With the growth of social media and more folks entering the miles and points hobby, there is a lot of attention on airlines’ First Class or Business Class seats. This is doubly true for longer international flights!
If airlines aren’t keeping up with the likes of Singapore Airlines Suites or Etihad, flyers will begin to flock to other airlines. For me, once I saw the Singapore Airlines Suites, I made it a goal for myself to save up my American Express Membership Rewards to use on a First Class ticket.
It is the game of “keep up or get left behind.” At the end of the day, flyers who use miles & points to book premium seats win! But if you’re looking for rock-bottom cash prices on flights to Europe, well, eventually the competition will get too fierce and they’ll need to increase prices.
3. Crazy Fuel Price Changes
All airplanes need gas, and until Elon Musk introduces an all-electric airplane, the airlines have to pay for it. And as we’ve seen over the past few years, fuel prices are a roller-coaster ride.
This makes it difficult for some airlines to make a consistent profit. Budget airlines can be hit even harder because they’re less likely to be able to handle extra fuel costs and still turn a profit.
How to Battle Back
Even if you aren’t flying any of these airlines that are struggling, why does this matter for you?
Less competition = higher ticket prices!
For example, if Spirit were to go under, do you think Frontier Airlines would run sales as often? Probably not.
With airlines struggling, the first reaction is to immediately raise prices, especially with competitors falling off. And as soon as one airline raises their prices, you can rest assured the others will follow. This is exactly what happened with baggage fees. And we’re seeing the same thing with airline lounge restrictions (here’s how to get around those).
One of the easiest ways to fight back, is to invest even more in earning miles & points with travel rewards credit cards. If airlines continue to raise prices, it will make earning miles more advantageous!
This is the golden era of traveling because it is now accessible to ANYONE regardless of income level!
However, economics do play a factor in the travel industry. It is a bit unsettling to see these airlines struggle, but every business has its challenges. The airlines will continue to fight for our business, and we will continue to fly to our hearts desire!
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