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 Fromtier (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…