Is the wave of low-cost airline bankruptcies coming?

Another low-cost airline has failed to stay afloat.

According to The Street, Mexican low-cost carrier Magnicharters has filed for bankruptcy protection with the First District Court of Mexico City. Earlier this month, well-known U.S. low-cost carrier Spirit Airlines also officially ceased operations.

In recent years, news of "low-cost airlines going under" has become increasingly common.

From Norway's Norwegian Air in Europe, to Japan's AIR Japan, and now Spirit Airlines and Magnicharters, many low-cost airlines around the world are either seeking bankruptcy reorganization or simply ceasing flights.

The industry that once expanded wildly with "ultra-low fares" seems to be struggling.

Magnicharters suspended all its flights last month.

At the time, the company stated externally that it was only a temporary two-week suspension due to "operational issues." However, subsequently, its Air Operator Certificate (AOC) was suspended by the regulatory authorities because the company was unable to bear key costs such as aircraft maintenance, technical support, spare parts procurement, and staff training.

As of now, Magnicharters has not officially responded to the bankruptcy news. However, flight information can no longer be queried on its official website, leaving only a customer service hotline for passengers to inquire.

In contrast, the ending of Spirit Airlines is even more heart - wrenching.

This U.S. low-cost carrier, famous for its bright yellow planes, had a market value of up to $5.5 billion at its peak and was also one of the most representative companies of the global ultra-low-cost airline model. On May 2nd, Spirit Airlines officially ceased all operations, with its last flight departing from Detroit to Dallas.

To survive, Spirit Airlines had actually struggled for a long time.

In the past two years, the company applied for Chapter 11 bankruptcy protection twice, hoping to gain breathing space through debt restructuring. At the same time, it continuously cut routes, reduced costs, negotiated with unions, and even tried to seek financing support from the Trump administration.

But in the end, it still couldn't make it.

Spirit Airlines CEO Dave Davis said in a statement, "For more than 30 years, Spirit Airlines has been working hard to make air travel affordable for more ordinary people and has promoted low - fare competition in the entire industry. It's very disappointing to reach this point."

Many industry insiders believe that the biggest trigger behind this round of low-cost airline crisis is oil prices.

Affected by the situation in the Middle East and the tension in the Strait of Hormuz, international oil prices have been rising continuously, and the price of aviation fuel has also soared. This is precisely the cost that low-cost airlines can least afford.

Because low-cost airlines are essentially businesses that "push costs to the limit."

They try to pack as many seats as possible on the planes, operate flights during the early morning hours, use a unified aircraft model, and charge extra for meals and luggage... Almost all possible cost - saving measures have been taken.

But fuel is different. The amount of fuel burned when an aircraft flies from one place to another is fixed, leaving little room for cost reduction.

Currently, fuel costs usually account for about 30% of an airline's total costs. For low-cost airlines that have already compressed other costs to the limit, the proportion is often higher. Once oil prices skyrocket, the profit margin will be instantly swallowed up.

Especially in markets in Southeast Asia and Latin America that are highly dependent on imported fuel, low-cost airlines are more significantly affected.

Recently, many passengers have received notices of flight cancellations from Southeast Asian low-cost airlines, which has also made the market start to worry: Is this round of "low-cost airline collapse wave" just beginning?

However, on the other hand, the low-cost airline model itself has not disappeared.

On the contrary, in the past few years, the entire aviation industry has become more and more "low-cost airline - like."

Free meals have been reduced, checked luggage is charged separately, cabin seats are arranged more densely, and various additional services are sold separately...

What were once criticized as "low-cost airline practices" are now also being adopted by many traditional full - service airlines.

To some extent, "low cost" is no longer just a survival method for low-cost airlines, but a reality that the entire civil aviation industry has to accept in the face of the high - cost era.

This article is from the WeChat official account "Travel Daily". Author: Zhao Linlin. Republished by 36Kr with permission.