The President hadn’t yet decided whether to bail out Spirit Airlines on Tuesday night, and Commerce Secretary Howard Lutnick and Transportation Secretary Sean Duffy debated the issue in front of Trump at the White House.
The Wall Street Journal reports that the discussion came down to politics and whether it would help or hurt with the midterm elections in November.
- “Lutnick argued to Trump that the president would see a political win by coming to Spirit’s rescue months before the midterm elections and that the deal could save thousands of jobs.” Lutnick was behind the government’s 9.9% stake in Intel. He’s a prime proponent of tariffs and industrial policy.
- Duffy said the government would get stuck owning Spirit Airlines, this “could leave voters with a negative impression about the Trump administration trying to bail out a failing company” and that might outweigh ‘saving jobs.’
There has not yet been any reporting on what legal mechanism the administration could plausibly use to fund a $500 million loan to Spirit with warrants that could convert into a 90% stake in the airline.
I’ve steelmanned the case by suggesting the closest to legal might be use of the Defense Production Act, which allows loans to private businesses to create, maintain, expand, protect, or restore capacity when needed for national defense. However, nobody plausibly believes that Spirit Airlines and its sub-2% of domestic air travel capacity is necessary for national defense.
There is no appropriation or legislative authority to rescue Spirit Airlines, and all past airline bailouts have been done by Congress. The Intel investment relied on funds appropriated for chip subsidies during the Biden administration.
Despite how much trashing Duffy gets, he is clearly the adult in the room
Howard Nutlick is an a**.
And that has nothing to do with his particular position on this issue. He’s just an all around a**.
This a selective, extra-statutory intervention that socializes downside risk while muddling both competition law and regulations surrounding federal spending. It is a terrible decision, and establishes alongside tariffs the clownish economic illiteracy of this administration.
Gary, you should’ve lead with this: “There is no appropriation or legislative authority to rescue Spirit Airlines, and all past airline bailouts have been done by Congress.” True.
So, why is this or any administration debating any of this, especially as it relates to their own political standing (how this may or may not affect the midterms)? Go. To. Congress. Period.
@Thing 1 — Excellent use of Nutlick.
What I don’t understand is why creditors aren’t being brought into the discussion. Spirit is still in bankruptcy and any plan would require their approval. Does the government plan to pay them out on claims? Would creditors just want to liquidate assets now believing they’d get a better return now versus six months down the road?
Politically, it’s all about saving a “low fare carrier” and both parties if in power would want to claim that. But the airline has no viable turnaround plan. Two minus three will never be a positive number. Despite the people that think that so because Elizabeth Warren and Bernie Sanders told them so.
+1 to Thing 1. Spirit is a damaged, dying brand. Just let it go. You aren’t going to save enough jobs to swing a vote one way or another.