Spirit Airlines, which has spent the better part of the last two years in two bankruptcies, asked the Trump administration for a bailout. There’s no legal way to do this with Congressional legislation.
There’s no plausible path to legislative action for Spirit Airlines unless it gets attached to the reconciliation bill Congress is working on to fund the Department of Homeland Security. Already add-ons are under consideration for defense spending and indexing capital gains to inflation, as well as more funding for air traffic control.
Currently, though, airlines all over the world are using high jet fuel prices driven by conflict in Iran to seek government bailouts.
- air baltic has received a $35 million government loan with no collateral.
- China is considering aid to state-run airlines, including subsidies, preferential tax treatment, state-backed low-interest loans.
- Caribbean Airlines approached Trinidad and Tobago’s Finance Ministry seeking support, possibly including a TT$1 billion (US$149 million) debt write-off. THe country’s budget has allocated TT$626.84 million (US$92 million) for the airline.
- India is preparing a ₹4,000 crore ($480 million) credit program for airlines, with government guarantees up to US$120 million per airline, plus another $60 million match of private investment. SpiceJet is expected to be the main beneficiary. India is also imposing jet fuel price caps.
- Brazil is providing government announced an aviation fuel relief package with up to R$2.5 billion (US$500 million) per airline in financing, a R$1.5 billion short-term credit facility, plus fee deferrals.
- European airlines are asking the EU for temporary suspension of aviation carbon obligations, reduced taxes, and suspension of ‘use it or lose it’ slot rules (to block competition while simultaneously reducing flying).
- Nigerian airlines have threatened to suspend domestic flying unless the government provides relief to high jet fuel prices.
At the outset of Covid, the CARES Act (and then two subsequent rounds of additional payroll support) provided $54 billion in direct grants and $25 billion in subsidized loans to U.S. airlines, plus tax relief and funding for contractors.
Spirit received $754 million in direct payments from taxpayers during Covid. That wasn’t enough. The billion in debt against their frequent flyer program wasn’t enough. Bankruptcy financing wasn’t enough. You wouldn’t buy their tickets, so they want to make you pay for them anyway.
Delta CEO Ed Bastian has said in the past that investors can have confidence betting on airlines because they’ll privatize profits while socializing losses.
My hope is that we’ve tested at Delta at least the proposition ‘are airlines investable’ and I think the strong answer is ‘yes they are investable’. And even in the worst crisis imaginable we’ve proven ourselves. We’ve proven the value of what we bring to society. We’ve proven that governments will be there for us if ever needed again, hopefully never again.
United CEO Scott Kirby has made the same case – but said it’s important to be at the front of the line for handouts, ‘faster than the other guy.’
[I]n a crisis, if the crisis is bad enough, history has shown us that national governments all around the world will support their airlines and make sure they can fly through and be there on the other side of the crisis. The reason is because we’re a critical part of the infrastructure and they have to have us. They need us there on the other side.
…there are times that governments will let two or three airlines fail if there’s a crisis because they don’t think they’re going to need all the airlines. So it’s important – it’s the old bear analogy, you want to be faster than the other guy.
United and Delta have said they’ll keep making money through the crisis, but that doesn’t mean any airline support program in the U.S. won’t be broad enough based to benefit them, too. Remember that Delta and Southwest didn’t lay off workers during the pandemic, and had made commitments to employees that they would not do so, but were still given billions of dollars to ‘not lay anyone off’ too.
And, we’d better not take the bait, as taxpayers, unless there are meaningful worker and consumer protections included, such as an EU261-equivalent; as well as to prohibit stock buybacks and lavish executive bonuses. *ehem*
(Instead, we’ll likely just give any and all for-profit corporations a grant, which they don’t have to repay, with no strings attached, because, it’s socialism for the rich and the corporations they own, and rugged individualism for everyone else. Ugh. How many times, old man… trickle-down don’t work…)
Key phrase: “privatize profits while socializing losses.”
This is how I rationalize my occasional trips on Amtrak. My taxes already are paying for it, so I occasionally like to experience how my tax money is spent, for an additional out-of-pocket ticket fee.
It’s interesting to see the international subsidies. As US airlines are credit card companies with planes attached, these subsidies favor some of the powerful lobbyists. I see that Breeze and Southern Airways and some other small flight providers are options, but I just can’t take them too seriously, as they still are a sort of boutique brand here and there.
Airlines are not viable businesses. A viable business can survive and even sometimes thrive through downturns. Airlines fail at the slightest economic hiccup.
Great article seeing how crisis is approached through the lens of two of the most successful carriers. Very interesting how similar their philosophies are and will be equally interesting to see how they fare in the short-term future.
Airlines probably should get bailed out if they are providing essential services that their competitors don’t provide. I know of no significant routes that Spirit Airlines serves that aren’t also served by at least one competitor. As for preserving Spirit’s so called lower fares? Basic fares are available on other airlines which rival what Spirit charges after all the Spirit extras are paid for. This is an airline that has been deceiving its customers for years by providing the illusion of very low fares. Their scheme no longer works and they are asking us to bail them out. I say, NO WAY!
Airlines are not viable businesses. They don’t make money carrying passengers, cargo, or mail. They never did. They are highly leveraged and only make money charging ancillary fees. The latest fad at the US airlines, chasing “premium leisure” and ordering bigger planes to feature larger premium cabins assumes the k-shaped economy lasts in perpetuity. The global economy is on the brink of tanking, most especially the US one.
The airlines know they have to be bailed out as they are vital to national interests.
This is the problem with the industry model, at least here in the US. Airlines do not make money flying people from Point A to Point B. In an ordinary environment if they did airlines would raise prices. Just like you see at the grocery store. If demand fell airlines would park planes, furlough staff, etc. But since this isn’t profitable to begin with any modest downward pressure results in a sh$tshow.
Government isn’t there to bailout private business. Airlines could have rationalized capacity so that money could be made on their core business but they did not. Despite what Bernie Sanders and Elizabeth Warren might tell you a business must generate enough revenue to cover costs of delivering its products and services.
The credit card golden goose has limitations. The bottom line is that air travel cannot be affordable to “everyone.” The economics are not there. It’s like saying everyone should be able to afford steak and lobster.
socialism for the rich and the corporations they own, and rugged individualism for everyone else.
@ 1990 — We shouldn’t take the bait, PERIOD. Let them borrow or fail. Enough of the corporate welfare. We should use that money for ending poverty and providing accessible healthcare for all. And, for all you cruel conseravtives, going to the ER for preventable/chronic conditions does not count as accessible healthcare. It also wastes YOUR money.
@ lavanderialarry – Airlines do make money, just not very much relative to other industries. Their profitability is also cyclical. For example, back in 2015 we saw roughly 8.5% operating margins, a high-water mark. It’s fair to say the industry is capital-intensive, leveraged, and structurally fragile, and that recent strategies like chasing “premium leisure” reflect a bet on sustained high-end demand. But it’s simply incorrect to say that airlines “never made money” or only survive on fees or bailouts.
Also, the assertion that the global economy, especially the U.S., is “on the brink of tanking” is not at all supported by mainstream economic data. And it’s certainly not a consensus among economists. Growth has slowed from the post-pandemic rebound, sure. And there are real risks… higher interest rates, geopolitical tensions, and pockets of consumer strain. But the U.S. economy continues to show resilience through steady job creation, relatively strong consumer spending, and a still-expanding GDP. Leading indicators are mixed rather than uniformly negative, which typically signals a late-cycle environment rather than imminent collapse. Forecasts from both the IMF and Federal Reserve are pointing to moderate growth or a possible mild slowdown. But not a severe downturn.
Just think of the economic costs to the Middle East’s and Europeans airlines within reach of missiles from Iran if they created an RJFU RJOA event again. We are saving the Middle East and Europe from economic tyranny. Someone is going to deserve a big thank you and we are so sorry DT once this is done completely. TDS no more.