IBA, the leading aviation intelligence and advisory company, has published a new analysis revealing a widening gap between revenue growth and profitability among US low-cost carriers (LCCs).
While US LCC revenues outpaced those of full-service carriers between 2019 and 2024, IBA expects 2025 revenue growth for US LCCs to slow around 1% year-on-year, compared with approximately 3% for full
Total LCC revenues increased by approximately 34% between 2019 and 2024, outpacing the 25% growth recorded by US full-service carriers. However, the 2025 forecast for LCCs’ EBIT margins of -1% and net profit margins of -2% continue to lag those of US full-service carriers by 7% and 5%, respectively, reflecting intensifying cost pressures and weakening structural advantages.
This analysis is based on the recently released 6.1 version of IBA’s Insight data and analytics platform, which significantly
According to intelligence from IBA’s aviation consulting team, labour costs remain the primary driver of the margin pressures that US LCCs are facing, which is forecast to account for around 37% of total CASK (Cost per Available Seat Kilometre) in 2025. This is up from approximately 33% in 2019, driving up operational costs and straining the traditional low-cost model.
Unit margin analysis in IBA Airlines shows that, while most US LCCs operated with positive unit profit spreads in 2019, dispersion has widened significantly by 2025, with several carriers such as Southwest Airlines, Frontier Airlines and Allegiant Air now operating close to break-even at the unit level.
Image: IBA
IBA also reported that, with fare-led margins under sustained pressure, ancillary revenue has become a key driver of profitability. Based on 2024 results, US LCCs generate
The expanded ancillary revenue metrics in IBA Insight 6.1 highlight significant variation across US LCCs. Carriers with higher ancillary revenue exposure have been better positioned to protect operating margins, while those more reliant on base fares have struggled to rebuild profitability, which is increasingly shaping airline s
Image: IBA
The enhanced network overlap analysis from IBA Insight 6.1 also provides a new perspective on proposed consolidation within the US low-cost market. Analysis of the proposed Allegiant–Sun Country transaction indicates limited city-pair overlap of around 10% of ASKs (Available Seat Kilometres), positioning the deal as diversification rather than capacity consolidation. If approved, the combination would combine complementary leisure and diversified revenue models, helping to dampen earnings volatility in a low-margin environment.
As cost advantages narrow, IBA concludes that US LCCs are becoming incr
About IBA
IBA delivers the best of all worlds – deep aviation consultancy expertise and cutting-edge, actionable data insights, all delivered by a proven, expert team with a strong customer focus.
An independent, innovative and forward-thinking business, IBA has over 35 years of heritage and experience in aviation. Having won the Sustainable Technology award for its IBA NetZero platform in 2024 & 2023 and for its Carbon Emissions Calculator in 2022 and being named ‘Appraiser of the Year’ by its clients for five years, IBA prides itself on its integrity, fierce independence, and continual innovation.
The key to IBA’s success is its people – some of the best in the industry, based in multiple locations across the globe – real experts who are passionate about aviation and go the extra mile for their clients.
Featured image credited to istock.com/Nick Whittle
