Three smaller airlines set to benefit from Spirit's demise

On May 2, Spirit Airlines – a pioneer of the ultra-low-fare model – announced it was ceasing operations entirely. The company, which had made air travel more affordable for millions of Americans for 33 years, was hit by several shocks at once: its second bankruptcy since 2024, a sharp rise in jet fuel prices amid the conflict with Iran, and failed talks for $500 million in federal aid. The shutdown left 17,000 workers without jobs and thousands of passengers stranded, CNN reported.

The industry backdrop is unprecedented. The closure of the Strait of Hormuz has caused the largest oil supply disruption in modern history: according to the International Energy Agency, global supply has fallen 14 million barrels per day. As of Monday, the price of jet fuel in North America had topped $3.90 per gallon, while Brent crude was trading above $110 per barrel.

At moments like this – when weaker players leave the market while demand remains – opportunities emerge for companies ready to adapt to the new environment. The main risk for the sector is jet fuel prices. As long as the conflict over Iran remains unresolved and capacity through the Strait of Hormuz is limited, higher fuel costs will weigh on airline margins.

Major carriers are benefiting from Spirit’s exit: Southwest Airlines said it took in more than 20,000 Spirit passengers on the first day, while United Airlines took in about 14,000, CNBC reported. But the effect may be more pronounced for small caps, since competitive pressure is easing specifically on their routes.

We selected three small caps that operate in the affordable air travel segment and could capture part of Spirit Airlines’ passenger traffic. The stocks of all three companies remain highly volatile and sensitive to geopolitics, oil prices, and consumer sentiment.

Frontier Group 

Frontier Airlines (ULCC) is perhaps the closest large U.S. carrier to the classic ultra-low-fare model. According to the company, Frontier carried 33 million passengers across more than 440 nonstop routes in 2025.

Frontier tried to merge with Spirit back in 2022 but lost out to a rival bid from JetBlue. After news of Spirit’s shutdown, Frontier shares rose about 10% in trading on May 4.

On May 2, when Spirit announced it was ceasing operations, Frontier launched special fares with discounts of up to 50% for Spirit passengers and offered its GoWild Summer Pass for $199. Frontier currently serves more than 100 routes previously flown by Spirit and plans to add nine more destinations this summer.

For the first quarter, Frontier Airlines’ revenue rose to $992 million versus $912 million a year earlier. The adjusted loss was $0.30 per share – better than the consensus forecast for a loss of $0.37 per share and JPMorgan Chase’s estimate for a loss of $0.40 per share, according to a May 6 note by the bank. Revenue per available seat mile rose 17% year over year, and the management expects Spirit Airlines’ exit to add another 3-5 percentage points to that metric.

Still, JPMorgan kept an “underweight” rating with a $5 target price, citing a negative operating margin and structural problems with the business model. Citigroup, meanwhile, raised its target price on Frontier shares to $5.00 from $4.90 per share, while keeping a “neutral” rating. The company’s liquidity remains sufficient: Frontier had $974 million in cash at the end of the first quarter, about 25% of annual revenue and roughly $100 million more than a year earlier.

Overall, Frontier has eight “hold” and three “sell” ratings – “underweight” and “sell” – versus only one “buy” call, according to MarketWatch data. The average target price of $4.89 per share is 5.5% above the stock’s closing price on Monday.

Allegiant Travel

Allegiant Travel  (ALGT) is built around a niche model: the company connects small and midsize cities with leisure destinations, often remaining the only carrier on those routes. That model gives Allegiant more flexibility: it can cut or add flights more quickly depending on demand or fuel prices.

On May 2, Allegiant launched a special offer for Spirit customers: a 50% rebate in loyalty program points and a temporary fare freeze on overlapping routes.

But the main news for Allegiant Travel now is not Spirit’s exit: on May 13, the company closed its acquisition of Sun Country Airlines. The combined company is one of the leading leisure-focused carriers in the U.S., with a fleet of 195 aircraft and a network spanning 175 cities. The expected synergy gains from the combination amount to $140 million a year, and Allegiant expects to capture about half of that amount in the first full year after the deal. According to Morgan Stanley, after the combination, about 10% of Allegiant’s revenue will come from charter and cargo operations with fuel-cost pass-throughs in contracts: that makes the company less vulnerable to higher fuel prices than many U.S. airlines.

In the first quarter, Allegiant reported record revenue of $732.4 million, up 9.6% year over year. Revenue per available seat mile rose 20.8%.

Morgan Stanley kept an “equal-weight” rating with a $100 target price per share, according to a note seen by Oninvest. The bank values the shares at about 7.5 times expected 2027 earnings and sees upside of about 30%. Overall, the stock has six “hold” ratings versus five “buy” calls, according to MarketWatch data. The average target price is $99.80 per share.

JetBlue Airways 

JetBlue (JBLU) is the sixth-largest U.S. airline, and its history is closely tied to Spirit Airlines. Back in 2022, JetBlue topped Frontier Airlines’ offer and tried to buy Spirit, but the deal was blocked by regulators in 2026.

After Spirit’s bankruptcy, JetBlue is strengthening its already strong position in Fort Lauderdale, north of Miami, Florida. In the first quarter, the company increased capacity at the airport by 23%, while revenue per available seat mile rose 5%. Over the last year, JetBlue has added 21 new destinations from Fort Lauderdale, including 11 after Spirit’s shutdown, and plans to operate nearly 130 flights a day this summer – 75% more than in 2025.

Still, JetBlue’s financial position remains difficult: the net loss for the quarter was $319 million, while its high debt load of $8.4 billion continues to worry analysts.

TD Cowen raised its target price on the stock to $5.00 per share from $4.50 in a May 8 note, while keeping a “hold” rating and naming debt as the key constraint. The same day, Jefferson Research assigned the stock a “sell” rating: analysts cited strong earnings quality but weak operating efficiency and balance sheet metrics.

Strategically, JetBlue is betting on its JetForward transformation program, which is expected to generate an additional $850-950 million in EBIT by 2027.

According to MarketWatch data, 13 Wall Street analysts recommend JetBlue shares at "hold," five recommend "sell," and only one has a "buy" call. The average target price of $4.74 per share is 3.5% above the stock’s closing price on Monday.

This text is for informational purposes only and does not constitute personalized investment advice.