If you have flown you likely have flown with the larger airlines – Delta, American, Southwest and United. All have feeder companies and operate with through hub and spoke and have a large share of the market. When companies have a large share of the market, there is a desire for competition and lower prices and as long as airlines can receive access to gates (although they tend to be a little further walk than the more established companies) it is possible to start an airline. Ryanair in Europe tends to be the model and Frontier and Spirit were established with lower fares. If you bought shares, they were up after COVID when all airlines’ stocks went up, but now regular ebbs and flows of the market is back and some investments are better than others.

In an article by Shivansh Tiwary and Rajesh Kumar Singh of Reuters, Spirit Airlines file for Chapter 11 bankruptcy protections although it will continue to operate. Spirit is a Florida based airline and is known for bright yellow planes. Spirit is struggling with years of losses; failed merger attempts and heavy debt loads. Spirit tried to merge with JetBlue, but the deal collapsed.

In a Chapter 11 proceeding, the airline continues to function, equity or stockholders tend to lose most of their money and bondholders have to take a cut to keep the airline in operation. The cut is trading debt for equity and existing bondholders will provide $300 million in debt-or-in-possession financing, which combined with available cash will allow the airline to function through Chapter 11 bankruptcy. Spirit’s workers will receive the same pay and benefits.

Discount airlines mean not having many conveniences, but prices tend to make up for it. If you do not have much luggage, it is a good alternative. If you lots of luggage going to the larger airlines is very competitive when considering the extra fees of the discount.

Linking to dividend paying stocks, generally you would only buy the big 4 of the airline industry because many companies have gone through Chapter 11 bankruptcies. It is wonderful to consider the low cost alternative as a customer, but as an investor stick to the larger companies.

There are more questions than answers, till the next time – to raising questions.