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.