JetBlue, Spirit, and Frontier cut costs by delaying new plane orders

Cash-strapped low-cost and ultra-low-cost carriers are deferring billions of dollars in new aircraft purchases to save money.

As the aviation industry grapples with rising costs and engine repair delays, budget airlines like Frontier, JetBlue Airways, and Spirit Airlines are cutting back on expansion plans to focus on returning to profitability.

This shift follows a surge in flight supply in the US market, which drove down fares and squeezed revenue for carriers still recovering from the effects of the pandemic.

Airlines cut back on expansion

Low-cost airlines that aggressively expanded post-pandemic are now rethinking their strategies.

Frontier Airlines, JetBlue Airways, and Spirit Airlines, which last recorded annual profits in 2019, are among the carriers deferring new aircraft deliveries.

Frontier has deferred 54 Airbus aircraft to at least 2029, while JetBlue plans to save approximately $3 billion by delaying the delivery of 44 Airbus A321 planes until 2029.

These carriers are also looking to extend leases on older planes and exit unprofitable routes to reduce costs.

Meanwhile, fares have dropped significantly. According to fare-tracker Hopper, “good deal” roundtrip airfare for US domestic flights in September is down 8% from last year, averaging $240.

Despite the lower prices, airlines face increasing operational costs, exacerbated by engine recalls from manufacturers like Pratt & Whitney, which have grounded several planes.

JetBlue and Spirit cut costs

The deferral of aircraft orders is compounded by the impact of Pratt & Whitney’s engine recall, which has grounded planes across multiple airlines.

JetBlue CEO Joanna Geraghty highlighted the dilemma in a note to employees, pointing out that taking delivery of new aircraft only to have them sit idle due to grounded engines worsens financial strains.

Spirit Airlines, which reported an 11% decline in revenue and a $192 million loss in the last quarter, has also deferred all Airbus aircraft deliveries scheduled from next year through 2026 to at least 2030.

In addition to deferrals, some airlines are opting for sale-leaseback transactions to generate cash. Frontier, for example, has sold planes and leased them back to improve its liquidity.

Production delays

Despite deferrals from low-cost carriers, leasing rates for new aircraft remain elevated. Lease rates for new Airbus A320s and A321s reached record levels in July, averaging $385,000 and $430,000 per month, respectively.

Similarly, leases for Boeing 737 Max 8 planes are near a record high at $375,000 per month.

This high demand is driven by a global scarcity of new, fuel-efficient planes, exacerbated by ongoing production delays at Boeing and Airbus.

Boeing and Airbus, the primary suppliers of commercial aircraft, continue to face challenges in ramping up production due to skilled labor shortages and supply chain disruptions.

Both manufacturers have large backlogs of orders, with Airbus having over 7,000 unfilled orders for its A320 family and Boeing nearly 4,200 orders for its 737 Max planes.

Southwest Airlines to offer voluntary leave

As production delays and rising costs continue to impact the industry, airlines are focusing on flexibility in their fleet management strategies.

Southwest Airlines, an all-Boeing 737 airline, has already offered voluntary leave programs to staff due to overstaffing caused by Boeing delivery delays.

Tammy Romo, Southwest’s CFO, noted that the airline has “a lot of flexibility” with its order book from Boeing and plans to adjust its fleet strategy to meet financial and operational needs.

The broader airline industry remains under pressure to balance capacity with demand while managing rising costs and supply chain uncertainties.

Budget airlines, in particular, face the dual challenge of maintaining competitive pricing and managing cash flow, leading to these significant strategic shifts.