Airlines Seek Federal Bailouts Following Spirit Airlines Shutdown as Fuel Prices Rise
Rising jet fuel prices stemming from the war in Iran contributed to the shutdown of Spirit Airlines earlier this month.
Since Spirit had been seeking a $500 million federal bailout, other budget airlines are now looking for similar arrangements as the elevated energy costs eat into their bottom lines.
Fox Business reported on May 4 that the Association of Value Airlines — which represents Frontier Airlines, Allegiant Air, Sun Country, and Avelo — announced in a statement that the companies were seeking $2.5 billion in aid from the Trump administration.
That figure is reportedly derived from how much more the carriers expect to spend on jet fuel relative to last year.
“Value airlines are the lynchpin that commands fare discipline across the entire airline industry with sustained competition that expands options for consumers. Make no mistake: if there are fewer value airlines, flying will become less affordable for Americans,” the Association of Value Airlines said in their statement.
“What happened to Spirit Airlines is a clear warning sign of what can occur when policy choices and regulatory dynamics tilt the competitive landscape toward the largest incumbent carriers,” the group added.
“It underscores the need for continued collaboration among all stakeholders to ensure a balanced, competitive environment that supports the long-term viability of value airlines.”
The $2.5 billion would come through stock warrants that could be converted to equity stakes, according to Fox Business.
But senior Trump administration officials have said that such a deal is not likely.
“At this point, I don’t think it’s necessary. They do have access to cash,” Transportation Secretary Sean Duffy said, according to a report from CNBC.
“If they want to come to the U.S. government, we would be a lender of last resort. If they can find dollars in the private markets — I think that’s better for them,” he continued.
Duffy added that discussion of a bailout for Spirit prompted other airlines to seek deals “not necessarily based on need, but based on opportunity.”
Airlines for America, which represents major carriers such as Delta Air Lines, Southwest Airlines, and American Airlines, was critical of the proposal from the budget carriers.
The group said that “government intervention on behalf of those airlines would punish other airlines that have engaged in self-help in order to deal with increased costs and reward airlines who haven’t made those tough decisions.”
“That’s not a level playing field,” the statement added.
CNBC noted that the budget airlines have also asked Congress to pause the 7.5 percent federal excise tax on airline tickets.
The companies believe that waiving the tax would help offset one-third of their higher fuel expenses.
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