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Company makes too much money: "they're extracting monopolist rents! They need to be a regulated utility!"

Company makes too little money: "there's no money in this industry! They need to be a regulated utility!"

Power companies are the classic example. If power companies were forced to compete, their costs + competition tend to drive them out of business. As a result most power companies are forced to operate in really tight constraints with very limited but predictable margin.

I'm not saying that this a better outcome (power companies have their problems too). I was just commenting that this issue parallels the historical solution that was applied to utility companies.

If we let the free market do its work, there'd be no airlines. Jet fuel is heavily subsidized, the State injects massive amounts of money into airports and plane manufacturers, etc.

Honestly, with the looming climate crisis, we should probably just let them fail one by one and let alternatives (who can actually be profitable) take off.

When a necessary service is pushed towards being unprofitable / breakeven due to "free market pressures", it probably should have some kind of backstop to ensure the service doesn't completely fold - because it is necessary. I think the suggestion to treat it like a utility was trying to emphasize this.

I'd also feel similar I'd my primary water, electricity, or internet provider was on the brink of failing due to "free market pressures".

In this case prices are _below_ cost, no?

Airlines basically were a regulated utility until they were unregulated to the point where normal people can barely fit in a seat and there’s basically no amenities anymore. It used to be kind of nice to fly. That’s laughable now.

> Why does any of this imply they should become a regulated utility?

Because the majority of the HN crowd defaults to "a massive government bureaucracy would do this better" unless it's even tangentially related to their industry in which case it's "regulations bad" and "move fast break things."

Because the amount anyone would actually pay is substantially below cost for most routes, but it's still a service that many people depend on (either directly or by the indirect economic impact of travel). It's a genuine force multiplier that is unaffordable without being subsidized; making it a utility would just shift the subsidy from credit card points programs to the government.

I read it more as "you buy an airline because you want to run an airline, but what you actually end up running is primarily a credit card company." That doesn't mean you stop doing flights, it just means that the part you want to do is the part that loses your company money.

This sort of thing all the time when (for example) a movie lover opens a movie theater. Running a profitable movie theater is a lot less about movies and a lot more about maximizing concession revenue.

The point still stands that a dependency on creating a profitable airline company is a credit card company

When I lived in europe, RyanAir made most of it's money in the terminal. This is why every RyanAir terminal has a maze like exit from security (ikea-esque) before you get to the actual terminal.

The RyanAir CEO was even quoted that he expected some tickets to be come "zero-fare" Link: https://www.theguardian.com/business/2016/nov/22/ryanair-fli...

The point stands, airlines don't make money on flights. Flights are loss leaders.

tbf, Ryanair generates a third of its revenues from other ancillary offerings (including kickbacks from insurers and car hire firms as well as its legendary fines and fees) so it does fit the general pattern of it being unprofitable to simply sell tickets in competitive markets...

And Ryanair is the largest airline in Europe! And one of the largest in the world.

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> I agree that Spirit will be chopped up by whoever buys them. It happened to Braniff, PanAm, and a whole bunch of other airlines that weren't thrown a lifeline.

But that's not necessarily a bad thing. If the company is worth more to the market and society when sold as pieces, so be it.

It can both be true that (1) most of the revenue and operations focus is on the core airline and (2) most of the profit and valuation is driven by the loyalty program.

This is true for American Airlines: https://viewfromthewing.com/new-report-says-aadvantage-is-wo...

profit != revenue. Airlines have thin margins and the argument is that they're getting most of their profit from the financial side of things. This is the end state of any endeavor in capitalism: up the value chain there's always the business of trading imaginary units.

They can't do this most of the time because for most of the year on most routes, supply outstrips demand (i.e., many/most flights on most airlines fly at least a little bit empty, often significantly empty – overall load factors are about 80-85%). They have to charge fares that customers will be willing to pay, even if that means losing money on a given flight. They can only charge profitable fares on the routes and times of year when demand surges (peak routes, holiday periods, major events). They have to keep their network capacity high enough to satisfy the peak demand, but for most of the year and most of the network, demand is lower, so they have to settle for break-even or loss-minimization. (For the record, I co-founded a flight search startup that became a fare optimization platform.)

Sounds like a good way to lose all your customers to the other airlines that charge less.

Southwest used to do this, but then somehow got a CEO that burnt it all down instead of raising ticket prices by $20-30.

Before them Alaska Air was similar, and is now similarly bad.

Having the customers actually own the airline seems like a reasonable approach. The trick is kicking all the assholes off the board, so they can’t fire leadership for treating customers decently while turning a sustainable profit.

Consumers only look at bottom line. There is basically two markets with airlines, higher end market with credit cards and premium seating; lower end where consumer solely looks at ticket price.

They do, it’s just barely enough to cover the cost of doing business and volatility.

It isn't the case. It's a simplistic gloss on a complex finance outcome.

Some flights make money.

Some flights lose money.

Some finance structures make money while looking like losses to acrue tax benefits for other activities.

Sometimes the money is being made by holding companies not operating companies. Sometimes the assets are worth more as spares than operating.

All companies are complex. I do not think "flights don't make money" is true for all airlines, all flights.

Because people take "airline X makes $50k profit, and makes $55k off of the credit card, so therefore it makes all money from credit cards" which is true from a certain accounting point of view, and also entirely false, in that it's all accounting tricks and the credit card would be worthless without an airline.

Bag fees and other ways to get passengers to pay above the headline price. Like this kind of thing: https://hallofshame.design/ryanair-when-every-page-is-a-dark... and https://darkpatterns.uxp2.com/pattern/ryanair-travel-insuran...

Not to mention that loyalty programs and credit card bonuses don't exist in Europe.

Because it's nonsense. It's from some YouTube video that went viral a few years ago.

RyanAir notoriously uses cheaper secondary airports.

Because their social media strategy is fire

Yeah and it was an absurdly expensive activity limited to rich people

Was it cheaper or more expensive for the public to fly on them during that time or after deregulation?

As I understand it, everything about the industry was better back then too.

Case in point: Old Perry Mason shows where characters regularly drive to the airport, pay for a ticket and get on a plane. Flying was actually faster than driving back then, even when measured by time between deciding to leave and arriving at destination!

(Yes, tickets used to cost a bit more. Whatever. Figure in the price for camping in the airport for 4-5 hours, and then tell me the current system is cheaper!)

It’s not enough to “make a profit”.

Southwest has 30B in assets and makes $441M in profit. Like most airlines it’s a miracle of modern economics and should practically be considered a charity or a nonprofit. You would make more in treasuries or corporate bonds.

Ryanair is 3rd by passengers and 7th by passenger miles, according to this wiki page.

https://en.wikipedia.org/wiki/Largest_airlines_in_the_world

Obviously their model is different to the big American carriers. Perhaps there’s something about the homogeneity of the US domestic market compared to the EU market that favors loyalty based airlines versus budget airlines.

Spirit's assets are almost entirely their slots at ORD, EWR, LAX and LGA. They don't many of their planes.

Huh? What do you mean? They and Wizz air are public companies. Nothing would stop them from selling their planes etc.

They can probably make money on business class travelers who spend their companies money on flights which aren't necessarily the cheapest but can reap the rewards for their own personal benefit.

sounds like it's not efficient at all? it's barely functional as a business and is only surviving on grifty addons?

Because efficiency is not the end goal of life.

When CEOs and shareholders take all the money out of a company while doing none of the work, you think it's fine. When workers do the work and get the money, you think it's "bleeding the company dry".

Unions are one of the more effective ways for workers to fight back against "divide and conquer". Unions work to slightly adress the massive power imbalance between employer and employee; that's why the wealthy hate them and spread negative propaganda about them.

Not really true. If over night all salaries in all airlines would drop by say 20% overnight. Then yes, they would make a lot of money very shorterm. But then same thing would happen. Competition where they all would lower prices towards where they again have the same margins.

Yes, but how does stating the obvious - that airlines make almost all their money from flying planes, and that different lenses of the loyalty program's intrinsic value is accounting parlor tricks, and that the main reason they like the credit cards is because it drives people to fly with their loyal choice more - how does that drive more listeners to your podcast? Checkmate, reasonable guy.

All loyalty programs are stupid. People waste their time on 1-2% savings. It is insane.

I used to work for a company with about 1200 gas station/convenience stores. They tracked "Light product break even". Basically the profit to earn on fuel to make the store break even. It was like 2 cents per gallon most of the time. So they could be super competitive on fuel and still be profitable. It was pretty crazy to see that.

And it was Swifty - definitely a no frills experiences!

> charged between banks

It generally depends on the contract the merchant has with payment provider:

- some have relatively high merchant fees to cover for interchange fees

- others (generally called IC+) have the merchant pay the IC fee plus some other (generally much smaller) fee to the payment provider

In both cases it's the merchant that ends up paying them. It's not a concidence that in Europe (where there are caps to IC fees) the fees that merchants pay are generally lower.

> Most of modern life in America is an elaborate series of choices to maximize the distance between yourself and Spirit airlines passengers

So much this. I regret that I have but one upvote to give.

This. but also with frontier.

- People using devices without headphones

- People having loud phone calls on speakerphone with vulgar language

- People with bad body odor

- People looking to optimize their outcomes, even at the expense of others and net deleterious. (Speaking in numbers, willing to take +1 point of selfish outcome at the cost of several others' -1 leaving a net negative for the group)

The only bad experience I ever had on Spirit was from their garbage passengers, never had a problem with the airline itself, flew them probably 20 times. But then again anecdotal evidence is also garbage, so who knows, maybe we were just lucky. Or maybe a vocal minority made it sound worse than it was.

As an European who's lived in the US, Spirit was actually just as "good" as Ryanair. Sure, you can hate on both of them, but they're cheap and moce you from place to place. I can endure any discomfort for 3h if it meant I could save 100 or 150 bucks flying from NYC to Miami/FLL in high season.

I had much worse experiences with Frontier and promised myself never to fly them again. On one occasion we had to wait for 2h on the plane on tarmac after landing at MacArthur airport because... the airport staff was not responding to pilots' calls. Somehow they didn't know the plane was landing. It was 1 AM or so and while it might not have been Frontier's fault, to not be able to sort it out for 2 hours was telling. Had other issues, too, this one was most ridiculous.

The reason people hated spirit was the same reason they flew spirit, it was cheap.

My friends used to joke that it was like flying in a tin can, or that the wheels would fall off mid-flight. The jokes were endless.

I liked Spirit, though, great cost savings, and I didn't mind the minor inconveniences that came with it.

Aside from being known for being a cheap airline, the brand itself was pretty solid... I think it had everything working to its advantage. The bright yellow exteriors of the planes, a catchy name. I think people knew exactly what Spirit was and what they offered, which is the sign of a good brand.

They did things differently compared to other airlines, so it does warrant an explanation. People pay for the cheapest flight, and expect things like free bag checkin. Other airlines will charge everyone more, even if you had no bags and provide free bag checkin. I've had flights where I only had a small backpack and nothing more, I don't want to the "priced in" fee assuming everyone will check a bag. Spirit gave you exactly what you paid for, which is how it should be. No marketing mind games to trick you into thinking you're getting some luxury service. Even in first class most domestic airlines provide a subpar experience, might as well be for a good value like Spirit did. International flights are different though, and the bar is much higher there due to length of flights.

loved Spirit and flew with them 8 different round trips from BWI to many destinations. So cheap (clothes in bookbag) and never had an issue. They will be missed!

the "temu" of airlines if you will

wait a minute... what if?

with other airlines my experience would also be bad, just unreliably. you're getting cramped sits and bad service on united and AA as well.

I'm not paying hundreds of dollars for a glorified bus ride. I've had issues with passengers on other airlines too. There is no expectation of me as a passenger behaving a certain way, and therefore the likelihood of being mistreated by passengers or staff a like is low. As you noted, other people pay more thinking "higher class" people fly delta or whatever, and to protect that image and experience I expect mistreatment from staff and other passengers alike on those flights.

I would rather deal with someone putting up their nasty leg on the chair next to me, or listen to a movie with speaker on for the whole flight, than deal with rude flight attendants that won't respond to my needs, or dirty looks from other passengers because I'm wearing something comfortable.

Aside from what I see on social media posts though, I've never seen anything extreme like that flying on spirit in all the years.

it is economic segregation, the only type of segregation that could work in US

Be kind... When disagreeing, please reply to the argument instead of calling names.

name calling aside, i think you missed my argument. If you think my taste is trashy, by my argument, your taste is also trashy, you're just dumb enough to spend extra money so you feel like you're above others. That's the point of the whole "value" thing, if more money gets you more value, that's great, if not then you're saying paying more for less is less trashy? It's like a person paying for a $15 wine and a $70 wine, the quality in that range isn't all that different, you're acting like you're paying $10k to fly singapore airlines when you're just flying cramped on united just like on spirit, but you're paying more.

And you sort of made another point I had: people like you, and companies who cater to people like you come with all that haughty snobbishness that's just unpleasant and degrades the experience. Good taste has to do with appreciation of value and quality, not polishing of one's ego, or pretending you're superior to others.

Thank you. There's a lot of criticism and skepticism here, and it's nice to see an optimistic comment.

I've no idea if the proponents of this plan are reputable, but the concept reminds me of the early years of WestJet, when they made a big fuss about being employee owned and had (back then) a markedly better customer experience. For US residents reading this, I'm told they were a bit like Southwest Airlines.

Even if the naysayers are correct and the probability of this panning out is low, you'll never hit the pitches you don't swing at, right?

aren't there plenty of state owned airlines?

https://en.wikipedia.org/wiki/List_of_government-owned_airli...

wow, it's almost like you will become... a shareholder?

Yes. Reminds me of the “anarchists” that don’t realise that they just want to recreate the government but with their people in charge.

co-op: one member, one vote. members elect leadership with standard term limits. emphasis on services, price and patron returns. dividend according to use not capital investment. members have direct engagement in financials. public companies: votes scale with shares. large institutional investors and other large share holders have most say in leadership. emphasis on "shareholder value" (eg extractive value). dividends according to shares. shareholders have only limited visibility into finances. they're very different, concluding otherwise is misguided

IMHO this should have been written “to the customers and employees”. To me, those are the people who compose a business enterprise.

Few people know this, but Desjardins, a Canadian financial service cooperative, is hugely popular in the province of Quebec (and also Ontario), and has close to CAD $400 billions in total assets.

I wouldn't say they are common.

MEC was the only co-op I have ever been part of. I'm pretty sure they stopped being a co-op and sold it to private equity.

This really doesn't feel like a Co-op to me.

It sounds more like a credit union. (first $5 goes to your ownership share / vote, and the rest of your money goes to your account).

I dont know of any with such high capex

This is a really interesting thing, both from an ownership structure perspective and from a "there is nuance in the details" perspective. I did a bit of a deep dive into this a few years ago when there was a local refinery strike. The refinery is a co-op and is also part of a larger co-op system.

I'll lay out the specifics here from what I learned. I'm not convinced either way, yet, that it could work for an airline.

So here's the ownership structure:

- Co-op Refinery Complex (CRC) - produces fuel

- Federated Co-operatives (FCL) - owns the refinery, also owns food and agriculture distribution warehouses, negotiates bulk pricing

- 200-ish independent regional Co-ops jointly own FCL

The CRC is highly profitable. FCL is profitable. The independent regional co-ops are not, on their own, all individually profitable. Some of these exist in small rural centres, some of them exist in larger cities. The urban ones are generally profitable, the smaller ones not so much. The rural ones, though, are largely the lifebloods of their communities; it's not unusual for the Co-op Grocery Store and Co-op Gas Station to be the only sources of food and fuel for miles and miles. While these do sometimes run at a loss, they make up for it with their annual Patronage cheques from FCL: when the CRC makes a profit and when FCL makes a profit (from the CRC and from their distribution network), those profits get returned back to the member co-ops on a pro rata basis: buy more from FCL, get more at the end of the year.

At the far tail end, each of these independent co-ops is a member-owned co-op. At the end of the year I end up getting a patronage cheque based on how much fuel, food, and building supplies I bought that year. It's not large, but getting a $100 cheque in the mail is always nice :).

In this situation, though, it all works because the not-so-profitable pieces own both their upstream wholesalers and a crazy-profitable refinery. (The refinery sells to other customers outside of FCL as well).

One of the other critical pieces that the strike/lockout/overall "labour dispute" really made clear to everyone: the independent Co-ops, FCL, and the upstream CRC are all member-owned co-ops, not worker-owned co-ops.

---

So let's look at how an airline co-op might be structured. The first parallel that I could see would be flipping the regional airline model on its head; currently the big players like Delta and United run a bunch of their smaller routes through regionals (SkyWest, Republic, etc). If a bunch of them got together, they could in theory jointly one one of the majors. The wrinkle there, as others have pointed out, the majors aren't profitable as airlines, but rather through their credit cards and loyalty programs. Alternative, then? Do a bunch of regionals get together and buy a bank? Let the bank be profitable, let the major airline handle traffic between the regional hubs?

I know quite a bit less about worker-owned co-ops, but generally speaking aviation is incredibly capital intensive. Starting a worker-owned co-op airline is probably not possible. A single, say, 737 Max 8 costs $121M. That capital's gotta come from somewhere.

Templates need to be filled. Breaking template rules requires actual thinking.

You know the answer. An LLM wrote it.

I agree, but I started noticing the em-dash usage spike.

even SF to LA would have trouble with a high speed rail because the price would likely be the same as a flight

Trains have been proven to be able to go at least 375mph [0]. That would make NYC->SF take 6.9 hours to travel the 4162 km. The current average flight time from NYC to SF is 6.7 hours.

So, it's at least technically possible.

China is doing R&D on a partial-vacuum train (basically Musk's hyperloop thing) with a target of 1,243 mph[1]. That's probably a pipe dream, but worth mentioning nonetheless.

> The government should of [sic] bailed out Spirit instead.

I'd be okay with this if all the taxpayers were granted equal shares that their collective money could have purchased at an imputed no-bailout price.

0: L0 Series SCMaglev

1: T-Flight train

Because today the options are "jobs exist" or "people starve in the street".

Hate to break it to you but the average guy that does manual labour would more likely become a criminal than a musician if you deleted his job.

What's that saying about idle hands.

Jobs root people to their communities and give them purpose in life.

Scenario: It's Friday night. You don't have to work tomorrow. Are you more likely to pull out your hammer and chisel and work on a classical marble sculpture -or- get shit faced at a dive bar? Hey, maybe the vomit splatters will evoke Jackson Pollock!

Check out the etymology of “utopia”

This is almost exactly the opposite of what most new airlines do. The fastest, cheapest way to get a good plane is to buy an old plane from an existing airline (preferably one going out of business, so you get a deal) and renovate it a little.

Good luck trying to get any planes with the current backlog. Unless you enjoy flying in the 737 Max.

Sounds like someone is selling securities without a license tbh.

Not that this isn’t a scam, but they’re currently asking for pledges to contribute, not cash.

If the industry is already highly competitive, which the US airline market is by any measure, one more marginal carrier accounting for just 3% of passenger miles, makes very little difference.

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Spirit, like many airlines, leases most or all of the planes

Agreed, a median would be a better indication.

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Yeah it honestly seems like an opportunity scam.

SEC should investigate this.

Thanks I will watch it, looks interesting. But i would say there's also a million documentaries, movies, news reports, examples and more about insane, evil, stupid shit that goes on in various corporations or how organizations turn to shit when acquired by PE as well. We know for example that cigarette companies knew their products caused cancer and other health problems for decades(!) while denying it publicly, and this is the bar regulators expect today - that they will do absolutely anything including letting people die through smoking or pollution or blocking access to healthcare to make a profit. So a co-op going poorly doesn't invalidate the concept.

Only on a nonstop. Spirit dumps passengers all the time on vonnections.

They often had the cheapest fares. That's basically the reason for all the shitty upcharges in the airline industry. Many folks don't care enough about that kind of thing to pay more for a flight on a different airline.

For clarity, absolutely nobody did or does this. Spirit is bottom of the barrel cheap - it made flying accessible for many people, who otherwise would not fly (think Ryan air). Absolutely nobody was interstate day tripping, especially on spirt, besides this poster.

The "low cost" in Ultra-Low-Cost-Carrier refers to the operating costs to the company, not the cost they charge for goods and services. Though they usually come in tandem.

The website tries to paint Spirit as some sort scandal where greedy traders drove it into the ground. Most of Spirit's debt was for financing expensive planes and surviving the pandemic. Literally every airline borrowed to survive the pandemic. Spirit has an ultra thin margin business, trying to compete on price, flying competitive routes, in an industry already known for losing money.

To my knowledge, there was no Wall Street villain here, and the creator of this page just inserted this sentence to arouse populist sentiment, because he/she knows a certain % of the population is primed to unthinkingly accept any narrative that the 1% have ruined something for the 99%.

“Wall Street” doesn’t load companies with debt or extract value from anything.

To give the guise of "serious investment about to take the company back towards a course of profitability and numba go up" of course.