All industries face some sort of disruption, somebody or some company always figures a method to offer cheaper way. In the airline industry it was the discount airlines.

In an article by Nira Chokshi of the New York Times News Service, discount airlines reshaped the US aviation industry by offering cheap fares and charging extra for pretty much every service imaginable. And they made a lot of money doing it.

Now those same companies known as ultralow-low carriers are in trouble. The companies expanded rapidly, now they are struggling to manage rising costs and to compete with one another and giants like Delta Air Lines Inc. and United Airlines Holding Inc which co-opted the strategies that make them so successful.

Spirit Airlines is seeking bankruptcy protection for the second time in less than a year. Other discount operators such as Frontier Group Holdings Inc are in better shape but not profitable.

Dan Akins, an economist with Flightpath Economics, an aviation consulting firm, noted the mainline carriers have effectively figured out how to compete.

No-frills carriers have been flying for decades under the simple principles: fly planes full and often, cot costs as much as possible, offer low fares but charge for extras.

Spirit reported annual profits from 2007 to 2020. Other airlines that came around were Frontier, Sun Country Airlines, Breeze Airways, Avelo Airlines, and Allegiant Air.

American Airlines Group Inc, Delta and United adopted some budget airline tactics. Pretty much every US airline now charges fees for checked bags, seat selection and other services.

The airlines started selling basic economy tickets that cost less but have more restrictions.

At the major airports, the largest airlines have the best gates which means there are fewer gates for the discount airlines or fewer flights.

As they grew, the discount carriers brought larger planes and began flying to bigger airports, putting them in more direct competition with the big airlines and other budget carriers. According to Cirium, an aviation data firm, Spirit and Frontier each doubled their share of all US flights.

Despite their rapid rise, ultra-low carriers account for 11% of the seats on domestic flights. American, Delta, United and Southwest control nearly 79%.

One of the methods the big airlines make billions of dollars in annual revenue from credit cards.

Allegiant flies on more than 575 routes, about 75% of which are not served by another revenue. It also earns revenue from its airline credit card and by selling travel packages that include hotel rooms, ground transportation and other services. The airline is sharply focused on the preferences of leisure travelers, who are its target customers.

Sun Country, a small carrier, has reported profits in each of the past few years. Sun primarily connects its home base of Minneapolis-St. Paul International Airport to other destination, but the airline earns 20% of its revenue from charter flights and half as much from operating cargo flights for Amazon.

Linking to dividend paying stocks, every industry has disruption and then the established companies have to respond. Sometimes they adopt the same tactics, sometimes they consolidate through use of larger resources, and usually it takes time before profits can be made consistently. As your investments see disruption, understand it will take time to respond and to see if their strategy works.

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