US Low-Cost Airlines Struggle as Leisure Demand and Tariffs Hit

US low-cost airlines are facing increasing financial pressure as demand for domestic leisure travel weakens and economic uncertainty tied to President Donald Trump’s trade tariffs disrupts consumer confidence.

The impact has been most pronounced for ultra-low-cost carriers (ULCCs) like Spirit Airlines, Frontier Airlines, and Allegiant Air. These companies rely heavily on domestic vacationers, a segment that has seen a significant decline. “The original ultra-low-cost model is gone for good in the United States,” said Frontier Chairman Bill Franke, citing persistent post-pandemic costs and increased competition.

Spirit Airlines filed for Chapter 11 bankruptcy in late 2024 and re-emerged as Spirit Aviation Holdings Inc. in March 2025. Its shares dropped 32% in their trading debut on Apr. 29. Frontier, which had previously followed Spirit’s model, announced on May 1 that it expects another quarterly loss. Smaller carriers like Sun Country and Allegiant have also seen their margins shrink.

These challenges follow a shift in the airline industry. Full-service carriers like Delta and United have expanded their basic economy offerings to attract cost-conscious travelers, cutting into the ULCCs’ market share. Meanwhile, consumer fatigue over hidden fees and poor service has grown.

Adding to the pressure, many US airlines have withdrawn their full-year earnings forecasts, citing declining bookings. Industry analysts point to Trump’s trade war policies as a factor affecting consumer spending.