With Spirit Airlines ceasing operations, other low cost airlines are doubling down on their request for a government bailout.
Here’s the CEO of Avelo Airlines, echoing the trade association which also represents profitable Allegiant Air and Sun Country (which are merging) and Frontier Airlines, Spirit’s primary ultra-low cost competitior (which benefits from the yellow carrier’s demise), asking for taxpayer support.
What’s the point of a low cost airline if its costs are low only because taxpayers are offering a put against those costs?
DOT Secretary Sean Duffy, though, says no and calls out the craven nature of the ask – they don’t even need the money but just see a change to pick taxpayer pockets.
He said the prospect of a Spirit bailout was seen by some other airlines as an opportunity to get money “not necessarily based on need, but based on opportunity.”
However, even Duffy’s statement was too solicitous of these private businesses, signaling a potential future willingness to have the median taxpayer bail out their shareholders.
At this point, I don’t think it’s necessary. They do have access to cash. 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.
The $2.5 billion fund that these airlines are asking for would come from the administration, which has no legal authority to provide it. They’re also asking for legislation that would,
- Suspend the 7.5% excise tax on domestic airfare
- Suspend the $5.30 segment tax that ostensibly funds air traffic control
U.S. airlines already receive huge federal subsidies. Leaving aside programs like Essential Air Service subsidies and Civil Reserve Air Fleet, DOT makes grants to airports to fund infrastructure and taxpayers are covering the cost of air traffic control modernization – the One Big Beautiful Bill Act included $12.5 billion for this, and DOT is seeking another $20 billion. This should be covered by user fees, as it is in apparently less socialist Canada.
Meanwhile, the trade group which represents major airlines opposes the subsidies that low cost carriers are seeking – not out of principle but because they don’t want the federal government propping up their competitors, driving down fares, and squeezing their margins.
After all, the previous CEO of American Airlines (and a former Chairman of the trade group) was the biggest welfare queen in the history of aviation, launching his CEO career with post-9/11 subsidies for America West, acquiring US Airways out of bankruptcy less than three omnths after the federal government picked up their pension obligations, and then leading the charge for $54 billion in direct airline payments during the pandemic.
The market for airline travel in the US can support some regular price airlines, some LCCs, and some ULCCs. How many of each is an economist’s problem that varies with the cost structure. I guess that doesn’t include Spirit. Does it include Frontier or JetBlue? Time will tell
Just no ….
Sorry, nothing for you, you’re not related
With Spirit out of the picture, the remaining airlines naturally become stronger. Desirable routes open up. Ticket prices in Spirit markets will increase. Equipment and pilots become available at marginally lower cost. No need for government assistance at this point.
Airlines eschew ‘government interference’ unless asking for money and relief.
Please, just keep jetBlue alive. Most legroom in coach, live TV, free WiFi, Mint, and they fly to nice places. Take Southwest; they’ve been downhill since got rid of the honey-roasted peanuts…
Pigs to the trough!! SOOOO-EEEE! SOOOO-EEEE! The only place they should be going is tge killfloor. Destroy all airlines smaller than Alaska, but leave Allegiant as a warning to anyone in the future.
As Andrew Levy correctly points out, when the one item that represents 33% of your costs increases in price by 100%, it represents a huge operational challenge. However, what Mr. Levy fails to mention is that the price of jet fuel (and the price of the gasoline we pump into our cars) will dramatically drop once the Strait of Hormuz is fully reopened. Of course the Strait had been fully opened for many decades until about nine weeks ago; fuel prices were generally stable, and businesses (such as airlines) could make reasonably sound business decisions based on that stability. So instead of seeking taxpayer-based relief from the federal government, perhaps these business leaders should be questioning the decisions made nine weeks ago that led to the closure of the Strait of Hormuz, and question the mental capabilities of the person responsible for creating the business challenges the airlines now face.
Spirit was expected to liquidate starting in December, long before the spike in jet fuel prices. They were still on a path to losing over $1 billion a year under lower fuel price scenarios. And a business model that only works at low fuel prices isn’t sustainable.
This is a challenge for struggling businesses. Avelo has not done well. They had already sold off part of their fleet to ICE. Frontier hasn’t made money since before the pandemic, except for an accounting artifact in 2024 involving sale and leaseback of aircraft. Frontier will benefit from Spirit’s demise. So will JetBlue.
When the CEO’s of these major corporations make millions and the taxpayers help support them I don’t feel one bit sorry for them…….. none of them! They are all taking away perks from their most loyal customers. No need to be loyal anymore unless you can afford to spend thousands on every single flight.
If Spirit, Frontier and JetBlue are all struggling while other carrier have posted record profits this issue is oil prices. The issue is a failed business model that exists at an unsustainable price point. If airfare actually correlated to cost of service a lot of people who be driving or staying home.
Do like every other business does. Raise your prices. If you can’t raise prices that means there’s too much capacity. Why should taxpayers subsidize airfares?
Hey Lucky Larry -Get a life and save the Trump bashing for some other leftist outlet. To their credit the Administration immediately quashed and put there foot down on this ludicrous request. Let these bottom feeders fend for themselves like everyone else in the industry.