ZH version is available. Content is displayed in original English for accuracy.
Advertisement
Advertisement
⚡ Community Insights
Discussion Sentiment
57% Positive
Analyzed from 6105 words in the discussion.
Trending Topics
#spirit#airline#airlines#money#don#more#credit#company#owned#pay
Discussion (177 Comments)Read Original on HackerNews
Unless this initiative will turn into a credit card company (which nobody likes or wants to do) it won't go anywhere
Private equity will likely sell the company for parts. There is no operational improvements for cash flow that they can do.
Useful watch (skip to 2:20): https://youtu.be/ggUduBmvQ_4?si=cyysP7aH_CIEDZRq
Company makes too little money: "there's no money in this industry! They need to be a regulated utility!"
The core part of air travel doesn’t really feel any different to a bus or metro or train. Off the tarmac then yes it absolutely feels like a Verizon store, as does some of the in-flight service, but there’s always been this weird feeling as a traveler that every carrier is basically the same thing but with different decals on it. Airline alliances are surely the ultimate example of this.
Try flying Delta. It isn’t the cheapest option, but you really do get better service.
If you want to feel special, do Aeromexico first class. The checked bags are waiting for you before you can even walk there on a domestic flight.
Spirit was cheap. And if you’re poor, you need cheap. If you aren’t, buy better service and don’t complain that it’s just Greyhound on a plane.
I'm not sure it's great to have important infrastructure operated this way. Other than regulation do you see a way out?
This is absolutely not true. If all the airlines were prohibited from making money with anything else (miles, credit cards) then airfares would rise across the board and there would still be plenty of demand. Not as much, but still plenty.
That's.... like a pretty shocking erasure of the idea of a demand curve given the forum here.
To be glib: no, that's not how it works. Increase the price and fewer people will fly, but the demand won't drop to zero. Decrease it and you make less money per ticket but the size of the market is bigger. At some point there is a local maximum, to which the market seeks.
But conditions change occasionally and the equivalent supply curve is moving rapidly because of the oil shock (i.e. it's more expensive to put planes in the air to service tickets you already sold). And things like the mess with Spirit are what happens when the market readjusts: the rest of the industry will (probably) backfill some of the lost capacity, but not all of it, and prices will (probably) rise a bit to a new equilibrium.
Member-owned co-ops don't need to make money. Structuring an airline as a member-owned co-op is not a fundamentally-stupid idea.
It sounds like there’s a problem with having too many flights that are barely full and hence unprofitable. AFAIK the federal gov spends significant money subsidising many “small airport” routes even if they’re barely used.
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.
I wonder if this will be the next "market" to exploit if ad revenue ever dies down too much, or if it's one that's always been there, and I've simply never been a part of.
If that's the case then how RyanAir survived and is thriving?
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.
But you have to follow the same model: use cheaper airports, a single modern aircraft type to simplify operations, high turnaround speed, charge a lot for extras.
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.
[1] https://en.wikipedia.org/wiki/Civil_Aeronautics_Board
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!)
They used to be. Read up on "Civil Aeronautics Board".
Even in this "airlines as point program companies" view of the world, flights don't make money in the same way that electricity going into data centers don't make money. It's a place where you have major costs and you want to try and gamify it, but at the end of the day it's pretty necessary for successful operations!
Consider why airline points even work as a model in the first place! Airlines have blackout dates and don't offer every seat in a plane for points because _they can make money selling a seat for more than what the points are worth to them_.
I heavily doubt PE firms are interested here as there is no potential for growth or a multiple. Spirit's assets are mainly their fleet, there are like 4 maybe 5 people who could buy, of these 2-3 are facing similar financial crises.
In the US I think nobody except United can afford to make a move, more likely some Asian airlines will move; many have grown and have route demand they can't service due to lack of aircraft. If you fly to Asia often you'll note that much of the time Asian airlines have to operate an aircraft from a US airline.
"If you want to be a millionaire, start with a billion dollars and launch a new airline."
Don't know where I read that, but it seems apropos.
I primarily use my favorite's airlines credit card because it gives me perks such as priority seating, and free checked bags. I am pretty certain that the credit card fees (that is passed on to the merchant) does not come close to the value that I gain for my credit card loyalty. It is a stupid game that I am forced to play, because the credit cards also provide other benefits, such as fraud protection.
I am wondering right now if "Spirit Air 2.0" even has a fighting chance if they are not able to subsidize operating costs by also being a credit card company.
[1] https://www.thestreet.com/personal-finance/delta-air-lines-m...
It's really just a surprising morph of their economic model in the post regulation era.
Just to be clear, that isn't what the article says. It says more than what "most" airlines generate in ticket sales. Not Delta, or any major US carrier. As interesting as that sounds, it couldn't logically make sense and it only represents about 15% of Delta's revenue. It's not even a straightforward revenue stream, it works for profitability because they are able to book most of the revenue immediately and able to mark down the future expense because of how loyalty rewards are obligated.
That's a reason to have an airline credit card, it's not a reason to use it (other than for purchasing that airline's tickets)
You are not forced to play it. That is a just story you tell yourself. You can make a different choice.
The $8.2billion from American express pays basically is buying tickets and ticket extra, it buys them some points, lets ignore multiples for now, it buys them 8.2billion points, which they give to customers which then buys tickets.
If Spirit accepts USDC instead it wouldn't be that much different.
Other airlines also have cramped sits, what little they did better than Spirit isn't worth the price, and the experience was inconsistent: some times you'll get nice flight attendants, a comfy plane, and a good check-in/check-out, other times you didn't. can't plan around them. With Spirit I could plan around exactly how bad my experience would be reliably. Just about any inconvenience was some fee away to address it.
Frontier was the cheap airline that just wasn't worth it. On the flip side, AA was overpriced with snobbish (just my experience, very limited) staff. Because it's a "cheap" airline, Spirit came with low expectations, and it only exceeded them to the most part.
I shop at walmart compared to whole foods and other "better" chains for similar reasons. "great value" as walmart's motto goes, it isn't about the price, it's about the value you get for what you pay for. Spirit was the "great value" airline.
I don't think this effort to buy it will prevail, I only wish the GME betters were in on this action. The airline's value hasn't gone away, similar to Gamestop. The people like it, the demand for it there, the airlines assets and staff haven't lost their value. I don't see how it isn't a good investment. This attempt to buy it is to little, too late. but if it came in actual stock purchase agreements, I'm down for it. But donating random cash to some site as a pledge, I don't know about that.
wait a minute... what if?
The only people surprised by Spirit were people who don't read warning labels and then you should only be surprised once. Heck, I paid 3$ for coffee on spirit but they would gladly bring refills and were proactive about almost like a restaurant. On AA and United, you usually had to go up and ask.
On top of that, you could get the big front seat (tm) which wasn't first class but pretty good about 150$ if you waited until your flight to bid. I got it a bunch and it came with free snacks and drinks and it was much cheaper than buying business
I'm gonna miss it.
Talk about damning with faint praise
https://www.yahoo.com/news/articles/american-airlines-worst-...
Noble, but this will fail. Why would anyone do this? No incentive.
These sorts of initiatives forget the toil of actually operating a business. You might as well get more pledges given that you'd have more control and the same profit share. It will regress to the same as the status quo.
> These sorts of initiatives forget the toil of actually operating a business.
For most businesses the size of Spirit Airlines, the owners typically do not operate the business. They pay people to do that. I don’t operate REI, even though I’m one of its many owners.
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?
https://en.wikipedia.org/wiki/List_of_government-owned_airli...
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.
See perhaps: https://en.wikipedia.org/wiki/Consumers%27_co-operative
Fidelity is still better in some metrics, however.
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.
Like, all people in the world?
Customers? Employees?
What does this mean?
EDIT: It’s shareholders, but each person has one vote regardless of share count.
If you assume there is an airplane — great, run the airline for the customers and employees. But the cost of the airplane can’t be handwaved away.
I'm surprised they don't also include a team page with a bunch of ChatGPT-generated photographs of fresh-faced fake people to really sell it.
How could it do anything but fail?
> *0* hedge fund owners. Zero
or including the date Spirit collapsed (despite already mentioning it earlier on the page!). Why not also include “*6* letters in ‘Spirit’” while you’re at it?
Nobody is buying spirit air... a bunch of gamblers just want to pump the price monday morning.
Bullhockey. Wall Street doesn’t assign debt. Poor management and bad risk-assessment leads to assuming bad debt.
This is like saying it’s the car’s fault that you drove to work today…
A period documentary about the Meridian Triumph motorcycles co op. Sad, thoughtful take on a particular bit of British manufacturing history. That the co op started with a strike, had to trade exclusively with a single customer, and that the senior workers became the managers they hated.
Due to the structure of that co op there was no way for them to access the capital they needed to redevelop their products and it ended up in private hands as a result, leaving the workers with nothing. I don’t think I would wish a co op on anybody.
The argument I have seen is that blocking it resulted in Spirit dying and people losing their jobs and there being less competition.
Wouldn’t the same exact thing have happened regardless? Am i supposed to believe that Jet Blue would have kept all of those employees? There would be one less competitor anyway, and in the merger case they’re even more powerful now meaning competing is harder.
It seems to me it’s just that creditors want to be paid out by a merger rather than paid our for cents on the dollar when it died on it’s own.
No idea if the extra time "normal" fuel prices would have allowed Spirit to find a way to stay afloat, but the fuel price spike stole any time they had to figure it out.
https://www.reddit.com/r/charts/comments/1psiwws/us_airlines...
https://cofree.coffee/~solomon/InhaleLabs_PitchDeck.pdf
Spirit was an objectively terrible airline. Their business model failed. They folded. The end. This is why you can't fly Braniff or Southern Airways anymore in 2026. Failed businesses go under, they don't live on in perpetuity.
- Warren Buffett (Comedian)
https://www.thebignewsletter.com/p/who-killed-spirit-airline...
Brilliant.
Plus, it's a carbon-polluting business that props up dirty, corrupt petrochem industries and regimes.
Let it die.
The employees are all gone and shuttered, even if you go try to rehire them they are all jumping to any other company if they stayed to the end. The pilots and cabin crew lost seniority and you won’t be able to afford ALPA union pay or AFA pay.
So while they somehow raised 26 million, it feels like a hollow gesture so that the creditors get paid but not really be realized into an actual airline with an AOC
At 26 million raised it’s actually better to make a new airline and run it lean. Get a good route or two and it could work, but 26 million is lean but doable. The liquidators want to get spirt planes released asap.
When the Packers upgrade their stadium and charge higher prices for tickets, I can promise you that they won't use the profits to buy back your shares or pay you a dividend.
One of the creditors that piloted their exit from the first bankruptcy also provided on $80M out of a $270M line of credit secured by assets Spirit needed to survive (an RCF was backed by their right to take-off and land at LGA amoungst other thinfs)
1 week before the 2nd bankruptcy, Spirit drew against the entirety of that line of credit.
During the 2nd bankruptcy, besides rolling large amounts the debt owed to them from the 1st bankruptcy (so Spirit would need to pay it back before other creditors), they had the proceeds of plane sales go towards... interest payments on their RCF and paying back additional financing from the 2nd bankruptcy.
The creditors leading the 2nd bankruptcy also sold the lease to Spirit's largest hangar on April 2nd, but did a similar thing again: instead of the cash going towards operations, it went to the creditors who'd led both bankruptcies.
-
Seeing as they refused the government's bailout, I'm guessing this is doomed as well, but interesting stuff for a non-finance person
*and fail to
And it was cheap, so you could book a next day flight without paying multiples in premium.
It was fun and affordable to fly out of state in the morning, spend a day exploring another place and get back at night.
1) Pledges being non-binding means there is no proof of funds. This means they can't actually make an offer, presumably they will have to email everyone who pledged to put in cash and hope it resembles a solid offer.
2) How much is Spirit worth? Their market cap was ~50M a few days before they shut down. Where are we getting 1.75B$ from?
3) Since these are non-binding pledges I'm inclined to believe most of these numbers are bots / fake. Especially as accredited investors skew older and make up less than 1/5th of the population!
4) 666 is a very specific significant number for the average pledge size to consistently stay at. I've watched the number of patrons go up by thousands and yet the average pledge size stay the exact same. The total pledged is certainly fake as a result, although see [3] pretty sure these are all fake numbers.
5) You get nothing in return for your pledge and definitely nothing in return for your money. They go to great lengths to add disclaimers that everything is proposed and subject to change at their discretion.
6) Just like the entire site is AI slop, the disclaimers are too, not worded correctly like regular financial disclaimers, in many places not required and in other places not good enough.
7) They pretend to care a lot about disclaimers and legal verbiage yet there is no mention of the entity or who is working on this bid so missing the most basic mark when it comes to financial disclosure!
8) It says "Spirit didn't fail because people stopped flying. It failed because Wall Street loaded it with debt and extracted every dollar it could." This is just a lie, no matter how Wall Street trades your stock it doesn't affect your treasury. Spirit failed because of horrible financial mismanagement and both an inability to maintain solvency under operating costs (which rose even further recently due to jet fuel shortages) as well as an inability to secure a line of credit. Technically you could also blame their corporate strategy although this was pretty good with the Jet Blue merger, so blame here also lies directly with Elizabeth Warren and Ted Cruz (unlikely duo!) for championing blocking the merger. You can find this from a simple Google search or asking your AI of choice.
9) While we're on the subject of financial mismanagement, whoever wrote this clearly has not much idea of how the finances for something like this would work. _It's not just AI generated — it's AI slop._
10) Whoever made this has no idea whether the assets are actually still there nor do we. Spirit may already be under binding agreements for asset sales.
11) Whoever wrote this also does not understand how companies run. First of all they think they are doing something revolutionary with equity, when almost every company has ESOPs/EIPs. Profit-sharing relative to ownership is also literally how shares work and Spirit already regularly paid these out prior to beginning their financial crisis. Every publicly traded company has open books and openly reports their financials each quarter.
12) "One member, one vote — your voice is equal regardless of pledge size." What incentive would anyone have for pledging more? Also, voice in what? Vote in what?
13) "No golden parachutes — executive pay capped at a fair ratio to median worker pay." First of all, this is not what a golden parachute is. Secondly, either the fair ratio will be ridiculous to allow properly compensating execs, or they will be underpaying by a large margin and find it difficult to get any proper execs in place. Then they can speedrun the last few years of mismanagement at Spirit.
14) "The cooperative model has worked: REI, Ocean Spray, Land O'Lakes, the Packers — all people-owned." These organizations all have well thought out models. This is not the same as AI slop.
15) "Private equity is already circling the wreckage." First of all, Spirit is freely undergoing an asset sale. Their operations etc. are shut down. Not only is this not appetizing to PE, but in general PE firms stay very far away from airlines which are famously low margin difficult to operate businesses with limited potential for growth once established. PE normally focuses on airports and airport services, neither of which Spirit has (their airport assets are limited to slots at LGA which are useless to anyone except airlines). The much more obvious buyer is other airlines looking to expand control and consolidate aircrafts.
16) It is common for a company facing insolvency to shut down, do an asset sale of expensive assets, and then come online in a much smaller form with remaining assets, funding itself with the sold off assets. I don't see why Spirit would not do the same thing, in which case even if a cooperative bid is put together it would be much weaker than disjoint buyers (e.g. Frontier and JetBlue separately buying some aircrafts).
17) Lastly whoever wrote this has absolutely no plan to deal with the high operating costs and failing industry here, which is really much more important than ownership incentive structures. No amount of kumbayah we're all in this together is going to drive jet fuel prices down or change the economics of commercial aviation.