Over the past week or so, there has been lots of talk of the government bailing out Spirit Airlines, which is on the brink of liquidation. If finalized, this would almost certainly give the government a 90% stake in the budget carrier. There’s now talk of a much broader industry bailout, which I have to imagine might just become a reality.
In this post:
US budget airlines need more cash to cover high fuel costs
The Wall Street Journal reports on a meeting that happened on Tuesday, April 21, 2026, between the CEOs of some US budget airlines, Transportation Secretary Sean Duffy, and FAA Administrator Bryan Bedford. Executives from Frontier and Avelo, among other airlines, were reportedly in attendance.
Under the proposal, the airlines are seeking a roughly $2.5 billion aid package, which is how much more they estimate they will spend on jet fuel this year compared to earlier forecasts, assuming jet fuel prices remain above $4 a gallon. This support would likely come in the form of warrants that could convert into equity stakes in the company.
Discussions are expected to continue in the coming days, and it remains to be seen what comes of this proposal.
This is just an all-around terrible situation for airlines
It goes without saying that the Iran war is having massive unintended consequences for airlines. While the full service carriers are doing a surprisingly decent job raising fares, budget airlines have a harder time doing so, given that they generally go after more price conscious customers.
I’ve been vocal about how I think it’s a bad idea for the government to specifically and exclusively bail out Spirit. That comes down to a few points:
- Spirit was already on the verge of liquidation before this spike in oil prices, as it has been through Chapter 11 bankruptcy twice, and I have a hard time making sense of how the carrier has any realistic prospects
- Even if the airline gets support, it’s not clear how this would help with competition in the long run, since Trump’s stated goal is to just sell the airline to another carrier, so it’s not like it would preserve ultra low cost carrier competition
- I don’t like the idea of essentially nationalizing our aviation industry, and having the government play favorites with airlines
- Lots of airlines are struggling financially, so why should Spirit get support, but not other airlines?
What do I make of this proposal? I’m not sure. On the one hand, we have to acknowledge that the entire low cost and value carrier sector is in massive trouble if oil prices stay where they are. We’ll see huge reductions in capacity, and more liquidations, if nothing is done, and that’s bad for consumers.
On the other hand, essentially nationalizing our airline industry doesn’t make much sense to me either. These loans would convert into equity, but does the government really want equity in airlines that are continuing to lose massive amounts of money, even if oil prices do eventually go down?
Furthermore, as mentioned above, Trump’s goal seems to be to sell these airlines at a profit, but that’s unlikely to be successful, and that also doesn’t preserve capacity among value carriers, since it would almost certainly be the profitable (full service) airlines doing deals.
At the start of the pandemic, we saw airlines get $54 billion in government support via the CARES Act, at a time when all airlines needed help. What’s different about this situation is that airlines like Delta and United are doing fine, while others are struggling. They certainly don’t need support, but how do you otherwise go about doing this fairly?
Folks, I’m stumped. I’m more in favor of the government giving widespread support to airlines, rather than just supporting the single airline in the worst situation. But if the government just ends up owning all unprofitable airlines, well… that seems silly?
Bottom line
Value carriers in the United States are in crisis mode, given that they’ve largely been losing money for years, and a doubling of jet fuel costs is unsustainable for them. So they’ve met with leaders in DC, and proposed $2.5 billion in support, and that could convert into equity.
On the one hand, if these airlines don’t get support, we’re about to see a lot more bankruptcies, and possible liquidation. On the other hand, the government basically owning the entire low cost airline industry also doesn’t strike me as a great idea.
What do you make of this proposal, and how do you see it playing out?
What the administration could do is to force United and Delta buy these companies. E.g. United buys Spirit and Delta buys Frontier. This happens all the time in the financial industry. Whenever a bank is in troublee, Chase buys it. United wanted to expand anyways, let them have Spirit.
If the government does not bail, we will see Spirit and possibly JetBlue shutdown. Low cost can work in today’s world. Allegiant is profitable. Frontier just pulled a profitable quarter. It would be wrong for an industry wide bailout. But bailing out targeted airlines makes sense if the failure would otherwise negatively impact the economy. The government has bailed out automakers, finance and other industries. This is not new. Chrysler re tooled with the bail...
If the government does not bail, we will see Spirit and possibly JetBlue shutdown. Low cost can work in today’s world. Allegiant is profitable. Frontier just pulled a profitable quarter. It would be wrong for an industry wide bailout. But bailing out targeted airlines makes sense if the failure would otherwise negatively impact the economy. The government has bailed out automakers, finance and other industries. This is not new. Chrysler re tooled with the bail out and paid back with interest to the us government. Should the government bail out a Spirit, it obviously would come with a new marketing and business plan; as they have entered bankruptcy twice already. But there is zero need for the government to lend to all airlines. With Delta proudly saying they won’t drop their pricing and expect to rake in higher profits; that would be a hard sell
The gub'ment blocked the merger with Spirit! Seems ironic to now 'force' a merger.
No more corporate welfare!! The oil companies are already subsidized by the feds hundreds of $$Billions. Instead, take that money, give people universal healthcare. From the money they save in premiums, copays, insurance company's obscene profits, people can then buy airline tickets.
Why stop here? Let’s give the legacy carriers a few billion while we’re at it. Let’s have the US government own a percentage of EVERY domestic airline. Seems only fair.
I don’t know that I’m for or against a bailout one way or the other. There are legitimate arguments to be made either way and I’m not going to re-hash Ben’s post because he lays out the argument well. What I am steadfastly against is the asinine citation of the Defense Production Act or other bogus natsec cover to do this outside of normal Congressional appropriations. This is transparently an allocation of taxpayer money and,...
I don’t know that I’m for or against a bailout one way or the other. There are legitimate arguments to be made either way and I’m not going to re-hash Ben’s post because he lays out the argument well. What I am steadfastly against is the asinine citation of the Defense Production Act or other bogus natsec cover to do this outside of normal Congressional appropriations. This is transparently an allocation of taxpayer money and, one way or another, it should specifically go through regular order. Hand waiving anything and everything under the sun with “well it’s national security” is ludicrously bad governance.
No way that the government should bail out failing airlines. It's a private enterprise and should be able to survive or die so other competitors can get to that marketshare.
If this helps to increase competition and therefore lower costs for Americans, this is a good use of money. Keep in mind, the US Government just made $27 billion from taking a stake in Intel last summer. Taking 10% of that to bail out the airlines doesn't seem like a bad idea at all.
Using tax dollars to bailout failing companies (complete opposite of Intel) is not a good idea and how naive to think it will benefit consumers. Govt will be better off giving $27B to citizens to subsidize airfare
The US supported intel for commercial, strategic and national security reasons that made sense. Saving a couple ULCCs that comprise less than 10% of total domestic capacity at a time when airlines are cutting capacity makes no sense.
And now the farmers want 20 billion, plus another 5 billion to Israel. Other than making the world less safe and more corrupt, what have we accomplished?
How about no nuclear bombs in the hands of terrorists? Isn't that good enough for the planet?
Moral Hazard
Spirit is a competitor.
Avelo, Allegiant, Frontier, as predicted coming for the tit of government assistance… could also be a strategic way of nuking any bail out. After all Poker Face is a well established airline game look too. Why not play it.
when you build an entirely industry around the idiocy of your fliers not being able to realize what they're actually paying vs what they see on Google Flights -- inevitably you run out of enough dumb flyers to be economically viable.
Let them fail if they can't make it
Both frontier airlines and spirit airlines have horrendous customer service. They dont refund or rebook. Its impossible to speak to a live customer service representative. They are not going out of business because of high fuel costs. They are going out of business because people have learned their lessons. I learned to never ever under any circumstances book a flight with frontier or spirit airlines. Most other frequent travelers have learned the same lesson. Both...
Both frontier airlines and spirit airlines have horrendous customer service. They dont refund or rebook. Its impossible to speak to a live customer service representative. They are not going out of business because of high fuel costs. They are going out of business because people have learned their lessons. I learned to never ever under any circumstances book a flight with frontier or spirit airlines. Most other frequent travelers have learned the same lesson. Both frontier and spirit owe me money. If both companies went out of business, it is because of their own policies and ways of doing business. If they both went out of business, I would be thrilled
I don't need to be pampered, and i don't need someone in india to try to speak with. I need legroom and good departure/arrival times, and a decent ticket cost. You do you, your 'free stuff' costs you a lot.
Let the free market do what it does best
No, no… socialism and unlimited money for the rich and corporations… rugged individualism for everyone else… /s
You post a lot 1990Bot, however, you say very little. Are you just a Ben, click generator?
Hopefully the legacies march into court and obtain a stay. If your business does not generate enough revenue to cover costs that's an indication you do not belong in business.
Operating airlines is expensive and now it's being turned into public transportation. Not only will taxpayers get screwed, "air rage" incidents will become common place. YT will be overflowing with content.
Three cheers for oligopoly! Hip-hip… hurray!
Let them fail. Bailing out an industry essential to the economy in a global crisis like a pandemic is one thing. Bailing out companies with bad business models, even with sky high jet fuel, is insanity.
Sky-high oil prices (caused by a pandemic called political stupidity) could also be classed as a global crisis.
Spirit airlines has been in operation since 1983. 43 years now. If it was a bad business model it wouldn't have survived that long to begin with
ULCC has been failing all over the world, the business model no longer works. Just because it worked before for 43 years doesn't mean it works anymore. No different than blockbuster or Kodak were in business for decades but business model changed and died off
If the Ultra-Low-Cost Carrier (ULCC) model can only survive when fuel is cheap, then the model itself is fundamentally broken. Bailouts just kick the can down the road and reward poor risk management. If they can’t raise prices to match costs like every other business, they should be allowed to fail so more efficient competitors can take their place.
The model is only broken in USA. It works in most other parts of the globe.
You meant to say "more expensive competitors can take their place" Less airlines = lower competition = higher fares = higher inflation. Not a good thing for the economy and consumers.
low cost model works fine. what doesnt work is having a moron as persident
Thankfully as of 1/20/25 we don't.
Breaking News. Everything costs more because of His War. We all get a bailout or nothing is bailed out. The ULLC model cannot be subsidized without paying truckers and farmers. I see no point in paying for airlines that cannot raise prices like every other industry must do to survive.
190 days until midterms. Can’t come soon enough!
And what do you think will change? Dems are paralyzing the budget, all both sides do is grandstand and bicker! They need to do their job and write a budget for the first time in 2 decades!
And there you have it... Now they all want a slice of taxpayer money. A word to the wise - competent strategic planning includes modelling stress-tests for worst-case scenarios. If companies have failed to do that, then their executive management is incompetent. No taxpayer bailouts!
Put Donny onto a LCC airline and fly into the sun.
One is minded to ask …. Would the failure of the LCC’s be healthy or even necessary in the longer term?
Alternatively, with government intervention would this prevent larger economic shocks and therefore justify such intervention?
Then one has to consider other transport industries, if airlines are rescued due to the fuel costs, will the government assist the road haulers, train line operators, shipping companies or energy intensive industries?
Could this home grown financial...
One is minded to ask …. Would the failure of the LCC’s be healthy or even necessary in the longer term?
Alternatively, with government intervention would this prevent larger economic shocks and therefore justify such intervention?
Then one has to consider other transport industries, if airlines are rescued due to the fuel costs, will the government assist the road haulers, train line operators, shipping companies or energy intensive industries?
Could this home grown financial crisis have been avoided if Mr ‘rump had kept his nose out of the Middle East?
One is sure that either Tim Dunn or 1990Bot will put me straight on these questions.
If Donald Trump says it, it's conservative now!
Wait, the 6x bankrupt guy? The guy all-over the Epstein files? The convicted felon? That guy??
Are the one who repeats lies and distortions? That guy? Grow up
No. We don't need a socialist bailout for airlines, especially ULCCs. Socialism is the worst disease we have on this planet (see my friend Sean Hannity's 2000 book "Live Free or Die", Chapter 4: "Socialism, A History of Failure"; we need to stop the' spread of this cancer.
An interesting submission Jeff. Sean Hannity’s books are often viewed it as clarifying and important by his Conservative followers. While Leftists, Liberals or centrist readers: often see them as partisan and lacking distinction.
Capitalism is the engine of socialism. When capitalists and socialists understand that, the world will be a much more comfortable place. The problem for the USA is that capitalism is the ideological winner of this century, much like socialism was the ideological winner of the last century. That is not good for a country with high wages and a desire to keep the latest tech out of the hands of capitalist/socialist/non-democratic countries.
Assuming B6 follows suit, merge with the LCCs then spin off the combined entity. That’s the only way this could possibly make any sense.
B6, F9, WN, perhaps XP (Avelo) a/o MX (Breeze) all merged into one lcc (let's all drop the u) is an intriguing idea. Combined entity would have some pricing power with solid domestic and international reach. It would keep FL competitive and minimize job losses except in Dania Beach.
Take em over. Abolish their unions. Gov officials and contractors must fly them. No taxes on their tickets. Give them coveted slots. Maybe even pass the CCCA? High dollar government cargo contracts.
Of course I don’t believe in any of that (well maybe the unions), but the Feds could get creative and get closer to profitability.
So, you hate public unions? Huh. Sounds like you hate law enforcement... One of the largest public-sector unions is police. Seems pretty unpatriotic of you... Sel, D. *knock knock* "OPEN UP!!"
If the LCC model doesn't work with fuel prices over $4/gallon, then the LCC model doesn't work anymore. Sure it's high now because of Iran, but the idea that fuel prices will never be high again isn't realistic either.
Competition is of course good, and I don't want them all to fail, but if they need bailing out every time fuel prices go up then it just doesn't work anymore.