United Airlines CEO Makes 'SHOCKING' Announcement

Written by Published

In a candid critique of his low-cost competitors, United Airlines CEO Scott Kirby has predicted a bleak future for airlines such as Spirit and Frontier, attributing their impending downfall to their subpar customer service.

Kirby's comments, made during an appearance on The Air Show podcast, were first reported by Business Insider.

"Those airlines grew big enough that they actually need repeat customers," Kirby said, according to Business Insider. He criticized their business model, which lures customers with rock-bottom fares only to hit them with exorbitant charges for oversized carry-on bags, sometimes exceeding the cost of the ticket itself. Kirby highlighted Frontier's alleged practice of incentivizing gate agents to flag oversized carry-ons, enabling the airline to levy an additional $99 charge on passengers.

"You can do it once, but you don't get to do it to them twice," Kirby warned. His comments come in the wake of a JD Power 2024 survey that ranked Frontier and Spirit as the worst and second-worst, respectively, among 11 North American airlines. "They haven't treated customers right," Kirby added.

The United Airlines CEO also took issue with a recent statement by Frontier CEO Barry Biffle that "lowest cost always wins." Kirby countered, "Best service always wins." His assertion is backed by data from the U.S. Department of Transportation, which reported that Spirit and Frontier had the highest rate of customer complaints among domestic carriers in 2023.

When asked about the future of ultra-low-cost carriers, Kirby didn't mince words: "I think they're going out of business."

Despite his criticism, Kirby acknowledged the role of Spirit and Frontier in disrupting the industry. He noted that passengers "want the lowest price, and they're willing to have a disaggregated price," leading United to introduce a basic economy fare. Unlike its low-cost competitors, United's no-frills fares do not include a carry-on fee, but they also do not allow ticket changes or cancellations.

Earlier this year, Spirit CEO Ted Christie accused the U.S. airline industry of being a "rigged game" favoring the "Big Four" United, Delta, American, and Southwest to the detriment of American flyers. Christie's comments were made during an earnings call with analysts, as reported by Business Insider.

Frontier, a Denver-based ultra-low-cost carrier, has been struggling to turn a profit, failing to do so in three of the last four quarters despite a surge in travel. This, coupled with Spirit's struggles, has led analysts to question the viability of their business model. Frontier's shares have plummeted 32% since early March, following a 47% loss in value last year.

Biffle attributed Frontier's woes to an oversupply of industry capacity in key leisure markets, which has led to lower airfares. Frontier's fare revenue per passenger fell 22% in 2023 from the previous year.

Spirit, too, is facing a challenging financial landscape. The airline is forecasting a loss in the second quarter, with its earnings hampered by the grounding of several of its aircraft and an oversupply of industry capacity in key markets. Spirit's shares have fallen by more than 75% since the beginning of the year, and a proposed $3.8 billion merger with JetBlue was blocked by a federal judge.

Spirit's financial struggles, despite high demand for travel, have raised concerns about its ability to manage debt maturing in 2025 and 2026. The company has reported "constructive" discussions with its bondholders and is aiming for a resolution this summer.

Like Frontier, Spirit's earnings have been hit by excess capacity in key markets, forcing the airline to offer heavy discounts to fill planes. The average fare per passenger was down 16% in the first quarter from a year earlier.

As the future of these low-cost carriers hangs in the balance, Kirby's comments underscore the importance of customer service in the airline industry. While low fares may initially attract customers, it's the quality of service that ensures their return.