Where Did Demand Go?

Frontier and JetBlue tried to explain their troubles by saying their customers went to Europe instead. Sun Country and Allegiant said otherwise. Plus: Why are airlines struggling in Cancun?

Dear readers,

By now, you know the themes of U.S. airline second quarter earnings calls. The three global network airlines reported robust earnings, buoyed by their long-haul flights, lucrative premium offerings, and massive loyalty programs. Yet the more domestic-oriented airlines shared that demand has slipped, telling investors the record-breaking summer many executives (and investors) dreamed about never materialized.

Since my last newsletter, Allegiant, Sun Country and Spirit reported earnings. Executives from all three discount airlines reported the same general themes — demand has cooled, and we likely have moved into a new stage of post-pandemic travel in which high fares do dissuade people from traveling. There’s also a new pattern of leisure demand, as people increasingly don't like to fly midweek or during shoulder periods, such as just after children return to school.

I won’t rehash those trends here. In this newsletter, I will share some of the most interesting parts of the Allegiant, Spirit, and Sun Country calls. You’ll learn that not all discount airlines endorse the argument that demand dropped because customers fled to Europe this summer. You’ll also learn why some discount airlines are struggling in Cancun, a market that usually has near-limitless demand. And you’ll learn the surprising reason Allegiant is changing its co-branded credit card from Mastercard to Visa. Paying subscribers can read on for all my analysis.