We know that President Trump is working on a plan for the government to bail out Spirit Airlines. The airline hasn’t turned a profit in seven years, and is continuing to hemorrhage money. The idea is to give the airline a $500 million loan, and for that to eventually give the government a 90% stake in the airline.
But what’s actually the legal mechanism by which Trump wants this deal to happen? We’re now learning more details about what this will look like…
In this post:
Trump to use Defense Production Act to buy Spirit
It’s now being reported that the Trump administration’s plan to bail out Spirit Airlines could be done using the Defense Production Act. That’s an emergency power that’s typically used to compel private sector companies to prioritize government contracts and increase supplies of critical goods. This also includes providing loan authority to private firms for national defense.
The idea is that the government would lend Spirit $500 million at a reasonable interest rate, and the government would then become the top debtor in the bankruptcy pecking order. The loan would be protected by Spirit assets, which would reportedly exceed the government’s costs, and would provide taxpayers with a warrant, with the right to own 90% of the company after it emerges from bankruptcty.
The Pentagon would also potentially use Spirit’s excess capacity for transporting troops and military cargo, with the goal of selling the airline to another carrier in the long run.
There’s not a whole lot that makes any sense here
On the one hand, I’m sort of delighted to see some conservatives now embracing socialism, so I guess that’s the upside here. 😉 But let’s be clear about how this is likely to play out:
- $500 million will last Spirit a matter of months based on its current burn rate, at which point the government will own 90% of the airline
- The government will then own 90% of an airline running huge operating losses, and Trump somehow thinks that other airlines will be interested in buying it, even though the interest hasn’t been there up until now
- If the government starts turning Spirit into a big government contract airline, then that also seems rather unfair; so the key to getting lucrative government contracts is to be days from liquidation after having a failed business model for many years?
I’m not sure if Trump just doesn’t understand the airline industry, if he can’t keep his narrative straight, or what. Because he contradicts himself with this Spirit deal even just sentences apart. For example, he saiD:
“I think we just buy it. We’d be getting it virtually debt-free. They have some good aircraft, good assets — and when the price of oil goes down, we’ll sell it for a profit. I’d love to be able to save those jobs… I like having a lot of airlines so it’s competitive.”
He says the government will sell Spirit at a profit to another airline, and then in the next sentence he says he likes having lots of airlines so the industry is competitive? Is that logic tracking for anyone?
Then again, it’s not even the most bizarre thing he said about Spirit. The prize for that has to go to his claim that Obama (president from 2008 to 2016) decided it was a bad idea for Spirit and People Express to merge (People Express went out of business in 1987).
Bottom line
President Trump reportedly wants to buy Spirit Airlines under the Defense Production Act, an emergency power typically used during times of war. The idea is that the government would loan Spirit $500 million, and that would ultimately give the government a 90% stake in the airline, as its top debtor.
Trump then wants to turn around and sell the airline at a profit, even though the interest hasn’t been there up until this point…
What do you make of Trump trying to use the Defense Production Act to make this deal happen?
Whatever stupid idea Trump has come up with during his second term, and there are many of them, he has argued with national security.
Since ULCCs are meant for human garbage, what a massive disrespect this is to our men and women who serve.
Not sure who is more mentally diminished at this point, 47 McCankles or Lil Timmy D
Is 500 million $ even a significant figure these days???
We threw 500x that amount at Ukraine for zero benefit and send 6x every year to Israel with zero contingencies.
Why is everyone having verbal diarrhea at trump buying spirit for the cost of 10 missiles?
That’s not the point, the point is that the Congress holds the purse strings, not the president. Read the US Constitution some time, it’s very interesting.
As you pointed out, the fact that trump is literally the most socialist president we have ever had is just ***chefs kiss***
Leaving market forces to work leads to results that make more sense. Noting that EU airlines are cutting flights and consolidating routes to weather the effects of Trump's war in Iran, how would this idea be of anyone's benefit. The Spirits have infested his brain again...
President Demento is off on another rant. Tranquilizer darts at the ready...
Trump was a registered Democrat for many years. He donated money to the Hillary campaign and other Democrats.
If he is a plant, he is trying to destroy the Republican party.
However, saving Spirit tends to be slightly more Democratic leaning so the plant theory is partly validated here.
To be fair, the man who ran Trump Shuttle into the ground ($125 million in losses before default) would make an excellent buyer for an airline that's never turned a profit. And he's doing it with someone else's money! OURS!
The same man who couldn't turn profit running A CASINO even with his pops dumping money into it.
Sure, whatever...let's just go full stupid.
Unless you are in the top 5%, it's not your money. The top 5% pays for most of the government. The top 15% pretty much pays for virtually all. The bottom 50% pays nothing. That is why the bottom 50% should run for office and seize all of the top 49%'s money or face prison. Make them have their fair share of prison time.
I might sound like a conspiracy theorist but how plausible is it that someone at Spirit management has said they'll rebrand as Trump Airlines if they get a bailout?
Spirit of Trump
There already was an airline named after Trump, the Trump Shuttle. It was just as successful as his casinos. It was never profitable. It defaulted on its debts, but Trump negotiated an exit in which he was relieved of the personal guarantees that he'd made.
The sad reality is this sounds entirely plausible