• A Spirit executive blamed mainline carriers for some of its financial woes during a Senate hearing.
• He said some airlines "manufactured" a pilot shortage and that others want Spirit "out of business."
• Spirit recently filed for Chapter 11 bankruptcy and is revamping its business to earn more revenue.

A Spirit Airlines executive blamed competitors for some of its financial and operational woes during a congressional hearing on Wednesday, pointing to factors including pilot staffing and limited airport access.

Chief commercial officer Matthew Klein told a Senate subcommittee that Spirit hasn't been able to grow because the mainline airlines "manufactured" a pilot shortage during the pandemic and "poached" Spirit's pilots.

When flying came to a halt during the COVID-19 pandemic, carriers trimmed pilot headcounts to cut costs.

"Some of our legacy carrier competitors basically paid the most senior pilots to retire early," he said. "That, in fact, caused a pilot shortage in the industry, and then they turned around and hired a lot of our pilots."

When flying ramped back up after the pandemic, airlines found themselves without enough pilots. This prompted large pay raises across the industry to fill the gaps.

Executives from Delta Air Lines, American Airlines, United Airlines, and Frontier Airlines also appeared at the hearing to answer questions about a November report covering what the committee said are excessive charges for seats and bags.

Spirit pilots are not paid as much as mainline pilots and could have left the company for better working conditions. Spirit's published pay scale shows that its Airbus A319 and A320 first officers and captains make between $97 and $312 per hour, depending on seniority.

Pay rates seen by Business Insider for American, Delta, and United show pilots flying the same Airbus aircraft make between $116 and about $360 per hour, depending on seniority and not including bonuses.

A Spirit spokesperson said they did not have anything to add about pay differences between airlines.

Klein also said pilots left partly because other airlines publicly said they were "gunning" for Spirit and" trying to put us out of business."

United CEO Scott Kirby said in a June podcast that carriers like Spirit and Frontier are "going out of business" because of their "fundamentally flawed" business models and poor customer service.

Spirit slams mainline 'dominance'

In his opening remarks, Klein encouraged the subcommittee to focus on the issues that he said are "by far the most impactful to consumers." He said this included mainline hub and slot and pricing "dominance" and mainline loyalty and credit card programs.

Klein pointed to how the mainline dominance has impacted Spirit.

He said Spirit struggles to secure gates at major airports, suggesting this blocks Spirit's access to routes and markets. He said when Spirit does get gates, they are often at the far end of terminals.

"This makes it difficult to provide a good guest experience and makes it difficult to operate efficiently and effectively," Klein said. "It raises our costs, which then, of course, makes it harder for us to be profitable, and without being profitable, we certainly can't grow."

Klein's subcommittee comments come after Spirit filed for Chapter 11 bankruptcy in November. The airline saved cash by furloughing pilots and selling $500 million worth of aircraft.

Budget airlines have been facing tough competition from mainline carriers amid rising costs across the industry.

Along with offering more premium seats and more inclusive fare bundles, Spirit and Frontier launched programs in 2022 that incentivized employees with bonuses for selling upgraded seats and catching oversized personal items.

Klein told the subcommittee that Spirit suspended the program on September 30. Instead, it has added more employees around the gate area to ensure customers comply with bag rules.

Frontier's SVP and CCO Robert Schroeder would not commit to ending its incentive program during the hearing.

• Frontier Airlines plans to introduce "first-class" seats in 2025.
• The move marks a shift from Frontier's no-frills model amid competition from mainline carriers.
• Spirit Airlines has made similar changes to earn more revenue as it struggles to turn a profit.

Frontier Airlines is continuing to break from its classic budget business model as it chases more premium customers.

The airline will introduce "first-class" seats in the first two rows of the cabin starting in 2025, it said on Tuesday. These will come at an add-on fee, though Frontier did not disclose pricing.

Renderings of the new first-class show large loungers with headrests, spaced two across with larger armrests. They appear to resemble Spirit Airlines' "Big Front Seat," which is comparable to mainline domestic first class but without some amenities, like free alcohol or meals.

Frontier also announced new perks for its status members, hoping to create more value for the airline's most loyal customers. A bonus mileage offer for new credit card applicants suggests Frontier also hopes to poach customers from competing airlines.

From early 2025, Frontier's Elite Gold members and above can receive free upgrades to the new first class and its "UpFront Plus" seats, subject to availability. The latter is Frontier's new business-class-like option that guarantees an empty middle seat — similar to what many mainline European carriers offer on shorter flights.

Frontier will also offer free unlimited companion travel for its highest-elite-status holders, meaning friends and family can tag along on flights. Further, starting in mid-2025, customers can buy seats, bags, and other ancillaries with miles.

"The New Frontier is our promise to deliver exceptional value with unbeatable flexibility," Frontier CEO Barry Biffle said in a press release. "As we continue to innovate and elevate the customer experience, we're proving that premium travel doesn't have to come with a premium price tag."

Shares fell about 5% following Tuesday morning's announcement.

Frontier's latest changes represent a departure from its traditional no-frills strategy. Its planes only offered economy, and everything besides an unassigned seat and a personal item cost extra.

Budget airlines like Spirit and Frontier — neither of which have turned a full-year profit in 2019 — have faced tough competition from mainline carriers that offer more premium options, like assigned seats and free carry-on bags.

Low-cost airlines have since had to adjust their business models to keep up with changing industry trends and target more premium customers who are willing to pay more for comfort and convenience.

Beyond Tuesday's changes, Frontier has also largely eliminated change and cancel fees, now allows a free checked bag when customers book with their Frontier credit card, and has restructured its fare classes to offer customers more choice and flexibility.

"Instead of just nickel and diming, airlines like Spirit and Frontier are doing more bundling, which is in line with what we at Breeze do, and we've found success," JetBlue Airways founder and current CEO of Breeze Airways, David Neeleman, told Business Insider in November.

Spirit has made similar changes to earn more revenue as it battles financial problems that led to a Chapter 11 bankruptcy filing in November.

This year, the airline has announced priority boarding for more eligible customers, seat selections with the middle seat blocked, the elimination of most change and cancel fees, and the option to book bundled fares.

• A Senate report found that Frontier and Spirit paid staff $26 million for fees they charged to passengers for bags and seats.
• The budget carriers say the incentives ensure customers are treated "fairly" and "equally."
• The Senate report said airport agents could "abuse" the program to earn more in commissions. The airlines denied abuse.

A Senate subcommittee report published on Tuesday revealed publicly for the first time how budget carriers Frontier and Spirit incentivized staff to charge passengers extra fees.

The report, viewed by Business Insider, revealed that between 2022 and 2023, the two airlines paid workers $26 million in bonuses "to catch passengers allegedly not following airline bag policies, often forcing those passengers to pay a bag fee."

The incentive programs applied to premium seats and carry-on bags that exceeded the personal item size allowance. Frontier paid the most commissions: about $18.8 million, according to the congressional report.

For domestic flights, Frontier workers earned $10 for each oversize carry-on bag purchased at the gate or online within 60 minutes of the passenger's departure time, $3 for carry-ons bought at the airport ticket counter, and $3 for selling extra legroom seats.

The airline's commissions were smaller for international flights: $1 for bags charged at the gate or online, and $0.50 for those purchased at the ticket counter.

Spirit employees earned $5 for charging oversize carry-on bags at the gate. They also earned $5 for selling the Big Front Seat, $4 for charging overweight checked bags, and $2 for selling exit row seats. The report did not say whether bonus amounts varied between domestic and international flights.

Certain managers at both airlines also earned a commission if their airport or region met a specific monthly revenue goal from ancillary fees.

Frontier and Spirit employees were ineligible for the bonuses, however, if customer experience ratings declined or the airlines received a certain number of complaints.

Data from the Department of Transportation and analyzed by the subcommittee showed both Frontier and Spirit's baggage complaints increased after the incentive programs began.

According to the report, Frontier adjusted the structure of its incentive program in October 2023 to try to collect more bags while limiting the number of passenger complaints.

Questions over whether the programs encourage abuse

Carry-on bags are not included in basic fares for Frontier or Spirit. They must be purchased as an add-on and fit into the carriers' personal item size checkers stationed at airports.

The report said the incentives "may inappropriately encourage abuse of discretion" — meaning gate agents might be prone to unfairly categorize items as too large in order to collect higher bonuses.

TikTok videos that surfaced in 2022 showed customers being charged for personal items that appeared to fit into the size checker. The report discussed these instances.

When asked about the videos, Frontier's vice president of pricing and revenue management told the subcommittee that it's possible a bag fitting in the size checker was denied for reasons other than its size. It could contain a lithium battery, for example, he said.

The report said both airlines denied that the programs are being abused.

Spirit and Frontier told the subcommittee that the programs were designed to maintain compliance with baggage policies and ensure that customers who pre-paid for luggage were treated "fairly."

The Frontier executive told the subcommittee that the airline did not want customers "to take more services than they have paid for."

The report said both airlines started the programs to boost ancillary revenue. It said Frontier projected it would earn at least $40 million in fees in the first year. The report also said Spirit's ancillary revenue increased during the program.

In statements to BI, both airlines emphasized the goal of treating guests "fairly" and "equally." Spokespeople for both airlines said that the budget business model unbundles fares and increases people's access to affordable flights.

"We respectfully disagree with numerous statements and conclusions contained in the report," Spirit told BI. "With that in mind, we believe it's time to come together and discuss meaningful initiatives that would even the playing field between larger and smaller airlines to benefit all travelers."