When Hot Markets Go Cold: Orlando Edition

Fares, MCO - Orlando

We heard last year all about the struggles in the ultra low cost carrier (ULCC) world, but now that we have DOT’s Q3 2023 data, we can see just how bad things were. I was particularly interested to look at Orlando data, since that city has always seemed to be the bottomless pit of demand. Apparently… it has a bottom, because Q3 was downright ugly.

Let’s start with a look at how the biggest players in Orlando did year-over-year from a systemwide perspective so we can set a baseline.

Q3 2023 vs Q3 2022 by Airline

Data via Cirium

In this chart, we have average fare, seats, and passengers. What obviously stands out is Frontier which had the highest percentage increase in seats along with the biggest average drop in fare. Even worse, passenger numbers weren’t up nearly as much as seats, so loads suffered. It was a disastrous result for the airline across the board.

United actually grew the next largest amount, but its passenger growth exceeded seats. It also saw fares drop much less than Frontier. And then there’s Spirit which saw less growth but its fares dropped far more significantly. 

What can we make of this? Overall, the ULCCs really took the brunt of the pain. Even Allegiant — an airline which actually shrunk capacity — had its fares drop similarly to what United saw on big capacity growth. The bottom end of the market just dropped out completely while the top end held up.

If we look at all airlines in the domestic market, passenger numbers were up 7 percent in Q3 2023 vs Q3 2022, but the fare dropped 6 percent. That gives you a sense of the systemwide trend.

Then there’s Orlando. And to make sure we’re all on the same page, I included both Orlando International (MCO) and Sanford (SFB) where Allegiant flies in all the data.

In Orlando, passenger growth outpaced the system with an increase of 9 percent. But the average fare plunged 16 percent. And when we break it down, fortunes varied greatly as we saw on a systemwide level.

Orlando Local Performance Q3 2023 vs Q3 2022

Data via Cirium

The three main ULCCs — Frontier, Spirit, and Allegiant — all saw a notable increase in passengers, up 12 percent combined vs last year. But look at how the fare fell off a cliff, down 28 percent. It’s hard to understand just how bad things were.

Frontier saw its fares dive the most — and well worse than system — off 33.3 percent. Let’s put this another way. Frontier flew nearly 16 percent more seats in Orlando in Q3 2023 vs the previous year, but it actually had 27 percent less in total revenue. Of course, this excludes ancillary revenue, but there’s no way that ancillary revenue made up for that kind of drop-off.

I don’t want to suggest that this is entirely a ULCC issue. It isn’t. All airlines saw fares drop more than the system average, as you can see in the chart. But nothing dropped even close to what happened with the ULCCs.

So what happened? 

In short, a ton of capacity was added into the Orlando market, because time and time again that market showed it could absorb it. This time, it couldn’t. There weren’t enough people willing to go to and from Orlando to fill all those extra seats. 

The legacy carriers, Southwest, and JetBlue were able to lower fares a little and give up some load factor to varying degrees in order to prevent fares from falling through the floor. Delta’s loads actually stayed flat, but JetBlue’s load factor was off 2.2 points vs last year, United’s dropped 3.4 points, Southwest dropped 5.75 points and American tanked by going down nearly 7 points.

But the ULCCs make so much money on ancillaries that they felt the need to really lower fares dramatically in order to get more people onboard no matter the price of admission. In this case, it didn’t work. Despite the massive cut in fares, Frontier and Allegiant both saw their loads drop by 2.3 points. Spirit fared slightly better at around 1.5 points down. Just imagine how bad it would have been had they not dropped fares.

The takeaway here is that there was way too much capacity in that market, and lessons will be learned. Orlando has finally hit a wall, and we imagine it will be a race to see who can cut the most there in order to improve overall performance.

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49 comments on “When Hot Markets Go Cold: Orlando Edition

  1. I believe this is why ULCCs are failing in the US.

    Instead of flying p2p in smaller markets that faces little competition (like Ryanair and Southwest do), they all instead decide to compete head on for the same few locations.

    The result? Junk fares.

    MCO has to be the symptom of the business model certain airlines use in the US. Cutting back here would benefit everyone (particulary B6),
    but will they?

    1. MCO is kind of the easy button — or at least it was before airlines found the bottom. No network planner ever got fired for putting seats into MCO. Ditto LAS and CUN — Cranky, any idea if those two showed the same trend? (Believe CUN was called out as being soft by someone like UA or F9.)

      Good to know that there *is* a limited (if still huge) number of people crazy enough to go to central Florida in freaking July and August. Those are great months for ULCCs to find places up north or east-west to fly.

      1. emac – Stop trying to ruin future plans! ;) LAS is very different, it saw a huge cut in capacity since it must have shown signs of weakness earlier. I was going to try to replicate this for Vegas soon. But Cancun is tougher since it’s international. I don’t have great fare data for ULCC-heavy markets like that.

        1. Curious about LAS, I suspect its more operational issues though then loads. This whole last year there has been construction, ground delays, movement limits. I was talking to a New Pacific FA and she said the flights were successful and full but they constantly had hour plus delays to take off which threw off the schedule for its Reno flights making it unsustainable.

    2. This is an excellent point. Trying to be competitive on unimaginative routes such as ORD or PHL and MCO is the equivalent of ounding your head against a wall until your brains come out your ears! But I shouldn’t be surprised, as Orlando is overrated in every other way, so why not this too?

      Allegiant is somewhat closer to the Euro ULCC model and it seems to be the healthiest of the three. Breeze has the same idea, only in a more upscale package. Neither has the scale of Ryanair, EasyJet nor WizzAir as yet however.

      1. It’s not a coincidence that F9 and Nk, which are struggling, use the same business model: Somehow undercut the legacies by offering a crappier product.

        Yeah it worked, until it didn’t. Now there’s just a flood of overcapacity in ULCC bread and butter routes (LAS, MCO, etc).

        None of the ULCC carriers fully copy their EU counterparts (nor can they) but Avelo and Allegiant are the closest thing the US has.

        1. Yes, I forgot about Avelo and you may have forgotten about Sun Country. Both have been successful, but both remain small players.

          As an aside, Frontier is owned by Indigo Partners – who also own Wizz Air. You would think that they’d learn what kinds of markets do best for ULCCs. Wizz Air has learned not to try and compete on routes where the big full-service Euro airlines have plenty of frequencies. You don’t see Wizz Air doing LHR-FRA. Why wouldn’t Frontier learn the same lesson?

          1. Sun Country has a hub and spoke model but that doesn’t distract from our points.

            You can’t compete head on against a legacy carrier and their strong hubs or flood capacity into select markets hoping to make a profit.

            Why hasn’t Frontier learnt this? I think the airline wants a network of decenty sized focus cities and p2p doesn’t do that.

  2. I wonder if Q4 will be even worse due to the start of Brightline train service between MCO and southeast Florida in late September. The Brightline train is not cheap but folks are saying the trains are packed. It will be interesting to see numbers on MCO-MIA/FLL/PBI routes before and after Birghtline.

    1. I can’t imagine there was much of a change. MCO-FLL/MIA flights are only there for connections to Latin America. The local market was pretty much exclusively driving prior to the train (and I imagine still will, given the train cost plus having to rent a car at MCO).

  3. I think the fact this was the 3rd quarter makes it even more concerning for the ULCCs.

    I can’t imagine the usually softer 4th quarter.

    Between ever rising prices and socio-political issues, Disney demand was off significantly this year.

    Top that off with people having to pay 25% more just for food than they did 3 years ago and the very population base for the ULCCs simply don’t have the discretionary spending power.

    Must be some serious soul searching going on in some of the route planning departments.

    1. Exactly what I was going to say. One of the issues not mentioned is that Disney has chosen to no longer cater to the average family on a budget & focus on the luxury spending traveler & from all accounts they are failing at it.

      Now you can add the butt hurt Governor into the mix with his anti Disney crusade & you can see the issues at play.

      On a side note, A family I know went to Disney last year & when they returned I asked the wife how the trip went & she said “dissappointing” as she had worked for them some years earlier & couldn’t believe what has happened to a place with that reputation. This sentiment has been repeated often over the past few years & is impacting all aspects of the Orlando experience.

  4. The Orlando-dissing in the comments reminds me of the Yogi Berra line “Nobody goes there anymore; it’s too crowded.”

    1. I reactly similarly in most posts about other FL destinations (I fly to the greater TPA area a few times a year to visit family). Between “the mouse”, beaches, snowbirds & retirees (with family from up north visiting them, and vice versa), and the Latin America cultural cornucopia that is the greater Miami area, there are a lot of people who fly to FL.

      /Not arguing that MCO/SFB didn’t see a downturn in Q3, and I’m not saying that FL is/has something for everyone, just saying that FL has the variety of flights it does in large part because the demand is there compared to other areas, even if it didn’t hold up in Q3 for Orlando.

  5. Something else to consider with this market. Orlando as a destination benefited during the pandemic. When people couldn’t go out of the country… When they couldn’t go to some states, because they were still closed, Orlando was open for business.

    But now, all those other places, no longer have restrictions, and travel to other places that exploded. So there are just art as many people thinking of going to Orlando… Or, at least they have many other options.

    And without getting political, the war between DeSantis and Disney probably affects some of it also.

    1. All true, but you can’t take the politics out of it once you attack one of the largest employers by calling them “woke” just because they disagreed with a decree that was stupid at best & nonsensical at worst.

      1. “just because they disagreed with a decree that was stupid at best & nonsensical at worst”…….. In your opinion.

        It’s no secret that the governor of Florida ran on a particular platform and the citizens of Florida obviously prefer that platform as evidenced by the election results in the governor’s race.

        So, if you really want to bitch about the “stupid and nonsensical” “decrees” that exist in Florida you should probably put the onus on where it truly belongs, which is the citizens of that state.

  6. Does average fare include ancillary fees? Obviously that’s a big chunk for the ULCCs and still substantial for the rest.

  7. With all this talk about Frontier and Spirit and sometimes a little Allegiant all having issues, we’ve not really heard about Sun Country in a while. They seem to be thriving. I’d love to see an article about what they’re doing differently. They seem to have CASMex close to ULCC level, maybe higher due to low utilization. Is it that Frontier and Spirit tried too aggressively to spread nationwide, while Sun Country kept a tighter focus?

    1. Eric – Sun Country is interesting in that it really tried to grow after first getting Jude Bricker in there as CEO, but then it completely retrenched and focused on MSP almost exclusively. And it worked wonders.
      That airline has figured out how to make a living off MSP + Amazon.

    2. I do think it has a lot to do with Sun Country having a specific niche that they stick to. They operate leisure routes from MSP where there traditionally hasn’t been much F9/NK or WN competition, plus they’ve tried bussing people to/from the rest of Minnesota instead of operating out of additional small airports.

      1. They also have the advantage of knowing that if anyone tries to come into MSP in a significant way, Delta will retaliate. DL is perfectly happy to coexist with Sun Country taking some of the leisure market, while everyone else flies mainly to hubs, focus cities, or a handful of their largest markets (F9 to DEN, NK to LAS, etc.)

        Frontier is starting Atlanta on April 10th, that should go well for them (he said sarcastically.)

      2. Sun Country also relies on the charter business, they are the official MLS airline. They have 41 737-800s, so a good amount of planes they need to keep busy.

    3. I think another thing that sets Sun Country apart is they hub at the origin instead of their destination. They target sending Minnesota travelers to sun destinations instead of bringing travelers from everywhere to sun destinations. Therfore, they only have to target one area in marketing and can become a household name. Also, they can add and drop sun destinations as they need to. If suddenly Orlando falls out of style, they don’t have to shut down a hub. And, I believe there’s 5.7 million Minnesotans looking for some sun in January.

  8. Based on some of the comments above, people are not comprehending the information.

    Passengers to Orlando are up. This article (unintentionally) gives the impression that passenger traffic to Orlando is down. It’s not. Passengers are up. It is the average fare that is down.

    1. But if the butts in the seats aren’t generating profits, then does it matter? It’s low yielding traffic that’s killing the ULCC’s as they attempt to keep on scraping the budget travelers from the legacies. They are finding out they cant scrape anymore & may need to shrink capasity.

      1. That’s a separate conversation all together.

        What I am referring to is the narrative that people aren’t going to Orlando anymore and it’s due to X, Y, Z or whatever false excuse they are coming up with. Then they are doubling down on this error by coming up with bogus reasons as to why there is a drop when in reality there is actually an increase in traffic.

        My lord reading comprehension is beyond bad these days and the herd follows along. SMH

      1. Sure, but the numbers don’t support the “no one wants to go to Disney anymore” narrative. They support the narrative that there *is* a limit to how many seats MCO can support, and that hopefully isn’t a surprise to anyone.

  9. This is why we saw F9 launch their major expansion into legacy hubs the other week. They need to find a new strategy since the bottomless pit bottomed out in MCO. We’ll see which routes stick to the wall and we will likely see more expansion into that specific legacy’s hubs. It seems to me like Barry Biffle hit the “Oh Crap” button when the Easy button stopped working.

    NK should be trying the same thing, though they have a lot on their plate these days. Running a below-system load factor in higher fare markets may be a lot more accretive to the bottom line than trying to fill planes to MCO at bus fare rates.

  10. I think the capacity will be needed next year, 2025, when Universal opens their new theme park.

    I actually think many people are holding off on their Orlando trip until next year in order to catch the new park. The opening of a major theme park is a once in a lifetime event, and Epic Universe (the park’s name) has had a huge buzz surrounding it because of its scope and gargantuan budget.

  11. One airline that is not mentioned here is Hawaiian, and it’s an experiment to fly nonstop from Honolulu to Orlando, to try and pick up some of that traffic that was envisioned to be there. Of course, there were also the attractions there for the Hawaii outbound – Disneyworld and the cruise ships. But with the way the economy went, and the cost associated with going on any one of those things, the traffic dried up going to Orlando. Out of Orlando, to Hawaii…well, the article shows that there were just not enough people interested in going to other places from Orlando.

    It will be interesting if the “Orlando” economy figures out that they are quickly being outpaced and outpriced by other locals and decides to lower their price points as an invite for more people to come to it.

    1. It will be interesting if the “Orlando” economy figures out that they are quickly being outpaced and outpriced by other locals and decides to lower their price points as an invite for more people to come to it.

      Doubt it. Places like Orlando & Las Vegas rather have fewer high dollar travelers these days rather than the low dollar masses. Although Vegas gets plenty of both as well as Orlando.

  12. Curious as to what the loads are like on AUS-MCO. Both airports had a ton of capacity dumped into them during/post pandemic and are now seeing cuts and reductions in service.

    1. Not formatted well, but here you

      Airline Code AA NK WN TOTAL Jan 2023 71.07 75.93 84.92 78.04 Feb 2023 77.23 74.34 86.97 80.61 Mar 2023 79.07 83.06 82.75 81.63 Apr 2023 75.15 83.91 78.96 78.90 May 2023 77.24 82.27 82.27 80.77 Jun 2023 80.51 87.23 90.28 86.23 Jul 2023 69.29 87.03 84.03 79.04 Aug 2023 54.90 82.98 70.46 66.81 Sep 2023 93.36 82.31 89.72 89.22 Oct 2023 88.90 83.25 86.17 85.13

    2. The latest T-100 data for AUSMCO shows an increase from 6.6 to 8.1 deps/day for the TTM period ending October 2023 compared to the TTM period ending October 2022. Daily seats are up from 1,069 to 1,347 (+26%). LF dipped from 86% to 81%

  13. Disney World seems to be discounting its hotels (over a certain number of nights) – suggestive of softening demand.

  14. Some of this is likely a function of the pressure planners are getting from above. Finance is no longer as patient with routes taking 2+ years to reach profitability. Doing PHL-MCO was always going to be less risky than PHL-BFE from that perspective.

  15. Hi Brett-

    Off topic, but did you see that Marty St.George is coming back to JetBlue?! Thoughts on this? Maybe you can make a post about it. They seem to have read your previous post and are bringing back some of the old team.

    1. AviatorNYC – Sure did, and I think it’s great news. It shows that Joanna knows what she knows and knows what she doesn’t. It also shows she’s willing to bring in someone who knows what she doesn’t. I think it’s a promising sign.

  16. Terminal C opened in September 2022, adding 16 additional gates to the airport. The international carriers (and JetBlue) moved into Terminal C, freeing up capacity in the original terminals for domestic carriers in Q3 2023 (compared to 2022). I suspect the domestic carriers increased their schedules as a long term play.

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