Here’s an interesting tidbit from the Wall Street Journal on how President Trump’s ‘Art of the Deal’ negotiating may have killed the taxpayer bailout.
- The federal government was prepared to put up $500 million, despite having no plausible legal basis for accessing the funds.
- Spirit Airlines offered the government an 80% stake in the company in exchange for the funds. The President came back asking for 90%.
- Ultimately, 90% was too high and creditors couldn’t agree, because there would be too little left for them. The airline would blow through the cash, they’d retain only 10% of the airline, and they’d recover more of their investment by selling off gates and slots at New York LaGuardia and other assets.
A taxpayer bailout and government ownership would have been a terrible idea. The airline didn’t shut down because of high fuel costs. The industry started expecting them to liquidate back in December, long before the run up in jet fuel. And they made grave mistakes, losing cost discipline (their costs were up 43% compared to before the pandemic) and refusing buy out offers from Frontier even after the Biden administration blocked their JetBlue deal.
Now troubled JetBlue (which hasn’t earned a profit in six years) faces less competition in Fort Lauderdale and troubled Frontier (Spirit’s major low cost competitor) faces less direct pressure.
However, we now learn that we were saved from this poor use of taxpayer funds that would have hurt other troubled airlines because of the President’s negotiating style which is just to ask for more. And business leaders meeting with the President now prep answers in advance to his desire for the federal government to own stakes in their businesses.
Uh. Okay then. Good I guess.
“Poor use of taxpayers’ funds”? I thought you said that that this would be an illegal use of taxpayers’ funds, absent of authorization from Congress.
This would have been illegal, a disaster, and totally screwed the bondholders. Sorry, the bondholders are more important than the Govt and they asserted that. Capitalism survives because we let failed companies die.
I have to believe that even the woefully incompetent businessman at the helm of our government knew this was a bad idea. So he made an offer that nobody would take, all so he could sell a lie to his followers that “gosh, we tried, we tried so hard to save the airline but the creditors wouldn’t take it, there was nothing more we could do”.
There would have been legal challenges and a stay granted. With that Spirit would have been still forced out of business anyway. Apparently, the airline was down to just a couple of days of cash on hand.
And anyone that thinks the Biden Administration would have not done same with opposition from Republicans is a moron. You understand zero about politics.
Such a greedy thoughtless son a a bytch
@George Nathan Romey – probably no stay, because who would have had standing to sue? Each house of Congress would, but they’re still controlled by the same party as the president. *maybe* jetblue and frontier would have standing? would they sue… their regulator… on an issue in which the president was personally involved? maybe…
I think he countered with 90% because he knew creditors wouldn’t accept it. Heck, he was probably surprised to learn creditors were cool with 80%.
In other words, he wanted to create the public appearance of “trying to save the airline” while also avoiding the legal and financial boondoggle of having the government actually own it.
Dear DJT:
80% of $0 is the same as 90% of $0. But who am I correct a stable genius that has found a way to personally rip off the American public. This is why you hate the education system. Keep the masses dumb.
Bailing out Spirit would have been a mistake. The only upside would have been listening to Trump try to make excuses when Spirit did bankruptcy number three.
Fromtier, ah yes that new airline. Do you ever proofread your posts man? Almost every single one has spelling and grammar mistakes, except the ones written by AI.
@Gary – an objecting creditor could certainly appeal the approval of a bankruptcy court confirmation order, but to get an actual stay of the order you’d generally need to bond the appeal (not going to happen). Absent a stay, the money would flow, and the plan would be considered substantially consummated. In the second circuit (where the Spirit case is) the defense of equitable mootness would likely be a winner against any appeal before you even get to the underlying issues of legality of the funding. Other circuits disagree and interestingly Alito when he was on the third circuit court of appeals wrote a dissent against equitable mootness (in the Continental Airlines bankruptcy naturally). Fun stuff. Anyway, all a (regular) moot point.
As for the public appearance of “trying” to save Spirit arguments – I agree with that, and yet, just as easy for him to blame the prior administration. My guess is he started at something out of left field like 90% and maybe was quite surprised when the response he got back was 80% vs 90%. At that point maybe someone had talked some sense into him that this was a terrible idea and he let it die.
People who say things like “anyone that thinks the Biden Administration would have not done same with opposition from Republicans is a moron. You understand zero about politics.” always impress me because it proves how much they understand about politics and how they are not morons.
@Winston — Startin’ to think this @George Romey fella, aka George N. Romey aka George Nathan Romey, often promotes disingenuous hot-takes and logical fallacies on here… h’yup…
The Biden Administration screwed this up first because it opposed the JetBlue/Spirit merger on competitiveness grounds, and Trump finished the job by declaring war on Iran, thus jacking up gas and other prices. Thank heavens his stupid bailout idea did not go through. Policy failure all around.
NO NO NO and HELL NO! The taxpayers do not need to rescue Spirit Airlines. The airline squandered two bankruptcies and other measures to save their butts but NOOOOOO. They couldn’t do it. The pilots will probably land jobs with other airlines, albeit at a lower seniority BUT…they have a job. The flight attendants same thing, gate agents…the worst of the bunch…maybe not. AMTs, they will face seniority issues, too but they will get jobs. Sometimes, it is best to pull the plug and let the patient die.
You don’t think the Biden Administration and people like Warren, Sanders, and the other morons would have not be screaming we need to save low cost airfares for the working class?
Yeah, there are people here that dumb and why we have the politicians that we have.
Spirit wasn’t worth 0% share for the government or anything else.
Trump wanted 90% of their $7b of debt????
Serious, google Spirit Airlines debt. They owe $7b
Nothing to buy except their debt
We bailed out Argentina with a high risk $20 billion We spent billions in Iran. Continually give Billions more giving to a genocidal state and we can’t negotiate a $500 million bailout to save thousands of jobs.
@jay – those jobs wouldn’t have been saved pumping in $500m, the money would have been gone in a few months
Trump famously said he would cut drug prices by 600% to 1500%. Since 100% would make a drug free, he doesn’t understand math. (Or *gasp* he’s lying but that couldn’t be)
@George Nathan Romey — Almost forgot… everyone is a moron… but George…
@jay — Sure it wasn’t $40 billion to Argentina?
Argentina was a currency swap, not a loan. We (US Citizens) made money on that swap.
Bad businesses are supposed to fail.
Delta and American are already trying to hire the good Spirit employees. They are all short staffed.
@steven m soriano — I don’t doubt *some* US citizens made money off that and every ‘deal’ this administration pulls… usually, insiders, not general taxpayers.
@steven m soriano — Speaking of ‘bad businesses’… you ever heard of the guy who bankrupted 6 businesses? One was a casino! (Lemme guess… those failures were actually a good thing…)
“Trump famously said he would cut drug prices by 600% to 1500%. Since 100% would make a drug free, he doesn’t understand math. (Or *gasp* he’s lying but that couldn’t be)”
It’s stupid yes, but an extension of a common problem in (American?) English. If an item costs $12 and goes up to $18, we all agree the price went up by a half (or 50%). If it is 3 times more expensive it went to $36. But, people will say an item is 3 times less expensive. The interpretation is the item is now $4. But, that idiot phrasing means, literally, it is -$24. But, Trump took it further. So, if a $12 becomes $2, then some say six times less. Trump made the 6 into 600%. So, by that “logic” $12 to $2 is a 600% reduction. I despise that phrasing, as, of course it is one-sixth the price or a five-sixth reduction, not 6 times less. I remember a reporter saying a new engine design cut NO emissions by 300%, all the while meaning it had one-third the emission. It did not emit zero NO and then remove additional NO from the air. Gosh, if so, I only need to invent an engine that has two times less CO2 emissions.
Right. Let’s put the blame on POTUS instead of where it belongs, on Liz and Bernie for killing the merger with B6.
Anything for a click?
@This comes to mind — Why are you even attempting to sane-wash the nonsense? @Andy was right. He’s a fool and a liar. Sure, some insiders are self-interested enough, financially, and some buffoons, because of bigotry, to just ‘got with it’ anyway. But, rest assured, we’ve dealt with this lying before with fascism, the confederacy, and our nation’s independence from ‘tyranny’ (Happy 250th, including Ohio…). You’re smart enough to know these are each failed ideologies, and they won’t last, even if some attempt to ‘do the math’ for them.