The Financial Anatomy of the Collapse
The core premise of Kahan’s argument—that Spirit lacked the ability to leverage its loyalty program as collateral—is factually inconsistent with the airline’s own historical filings. Between 2020 and 2025, Spirit successfully navigated the turbulent landscape of the global pandemic and the subsequent economic recovery by utilizing the exact same financial mechanisms he claims were inaccessible to them. Securities and Exchange Commission (SEC) filings indicate that Spirit secured $1.45 billion in debt issuance specifically backed by its loyalty program.
While the "Big Three" airlines certainly utilized their loyalty programs to raise billions in inexpensive capital to survive the COVID-19 pandemic, Spirit was not an outlier in this practice. Between federal subsidies, including over $750 million in direct cash and subsidized loans, and its own loyalty-backed debt offerings, Spirit had significant liquidity tools at its disposal. The airline’s eventual failure was not due to a lack of capital access, but rather an inability to deploy that capital toward a sustainable turnaround strategy.
Chronology of a Downward Trend
The decline of Spirit Airlines can be traced through a series of fiscal markers that predate the geopolitical instability or fuel price spikes often cited as the "fatal blow." By November 2025, while already navigating its second bankruptcy, Spirit reported an operating revenue of $239 million against operating expenses of $311.7 million. This resulted in a staggering 30.4% operating margin loss.
Crucially, this deficit existed independently of the volatility in the fuel market. Even if Spirit had been granted free jet fuel during that period, the underlying operational costs were so high that the airline would still have faced an operating loss. By December 2025, the industry was already bracing for a potential liquidation. Despite the availability of additional financing, the airline failed to present a credible, lender-approved standalone business plan. The narrative that rising fuel costs in the wake of international conflict caused the collapse ignores the reality that Spirit was burning cash at an unsustainable rate long before the energy markets tightened.
The Erosion of the Low-Cost Model
For decades, Spirit Airlines functioned as the gold standard for cost discipline, maintaining an operating cost per available seat mile (CASM) that allowed it to undercut major competitors significantly. However, the data shows a dramatic erosion of this discipline. In 2019, Spirit’s CASM was 7.97 cents. By the first nine months of 2025, that figure had climbed to 11.28 cents—an increase of 41.5%.
This cost inflation was driven by several factors, including labor contract renegotiations and significant engine maintenance issues that grounded large portions of the fleet. As the airline was forced to reduce its flight schedule to manage costs, its fixed expenses were spread over fewer seats, creating a "death spiral" of inefficiency. Furthermore, the decision to invest in an 11-acre headquarters campus while the company was hemorrhaging cash served as a symbolic disconnect from the fiscal austerity that had previously defined the carrier’s success.
Consumer Behavior and Market Dynamics
Beyond the balance sheet, Spirit suffered from a shifting market perception. While low fares remain a primary driver for many travelers, the modern consumer increasingly values reliability, network connectivity, and the digital experience provided by larger, full-service carriers. As Spirit’s costs rose, the airline was forced to narrow the price gap between its fares and those of larger competitors.
When a passenger is presented with a similar price point, the choice of a larger airline—offering better recovery options during delays, a more expansive route network, and a more robust mobile application—becomes the rational consumer preference. Spirit failed to offer a product that compensated for these deficiencies. Their attempts to pivot toward "premium" offerings were too little, too late, and failed to gain traction in a market already dominated by legacy players.
Analyzing the Regulatory Misconceptions
Kahan’s argument for regulatory intervention, specifically a ban on using airport slots and loyalty programs as collateral for private borrowing, fails to account for the actual mechanics of the industry. The suggestion that these bans would save smaller carriers ignores the fact that access to such capital was a lifeline for airlines of all sizes during the pandemic.
Furthermore, the issue of airport access is a legitimate challenge to market competition, but the proposed remedies are largely misplaced. Slot controls at airports like LaGuardia or Washington National have long been a bottleneck for entry, but banning the use of these assets as collateral would not solve the underlying issue of capacity. Instead, experts suggest that market-based solutions, such as congestion pricing, would more effectively incentivize the efficient use of limited infrastructure.
The assertion that frequent flyer programs should be abolished—a view Kahan has held since at least 1992—ignores the consumer value these programs provide. Loyalty programs have evolved into complex ecosystems that support network connectivity, allowing airlines to subsidize routes that might otherwise be unprofitable. By pulling the plug on these programs, the industry would likely see a reduction in seat capacity, a decrease in flight frequency, and ultimately, higher airfares for the average passenger.
The Broader Implications
The rise in U.S. airfares noted in late 2025 and 2026 has been improperly attributed to the loss of Spirit Airlines. While the exit of a competitor does reduce pressure in specific markets, the broader trend in airfares has been one of long-term deflation. When adjusted for inflation, airfares in 2026 remained roughly 18% lower than the 2016 average. The recent spikes in pricing are more accurately tied to the volatility of global fuel costs and the capacity constraints that follow when certain routes become unprofitable for airlines to maintain.
The attempt to frame Spirit’s demise as a consequence of systemic inequality or "anticompetitive" financial structures is a distraction from the fundamental economics of the aviation industry. Spirit failed because its operating costs outpaced its ability to generate revenue in a market that had moved toward higher service standards. The airline’s leadership lost control of its core value proposition, and by the time the financial crisis peaked, the business model was no longer viable.
Conclusion
The narrative provided by former industry insiders like Kahan serves to redirect blame toward systemic factors that have, in reality, provided the stability necessary for the survival of the U.S. aviation sector. By ignoring the specific operational failures of Spirit—such as the massive increase in CASM and the lack of a credible turnaround plan—the argument fails to provide an accurate reflection of why a once-dominant low-cost carrier ceased operations. The demise of Spirit Airlines is a case study in the dangers of cost-base inflation and the difficulty of pivoting a brand identity in a highly competitive, service-driven industry, rather than a failure of modern airline finance.
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