Despite opposition from congressional Republicans and even U.S. Transportation Secretary Sean Duffy, the Trump administration could announce details of a possible rescue deal for low-cost carrier Spirit Airlines, perhaps as soon as Thursday.
President Donald Trump on Tuesday suggested that the federal government could help keep a struggling Spirit Airlines afloat, while also encouraging a buyer to step in and rescue the budget carrier.
“Spirit’s in trouble and I’d love somebody to buy Spirit. It’s 14,000 jobs,” Trump said in a CNBC interview. “And maybe the federal government should help that one out.”
The plan may involve the federal government owning up to 90% of Spirit once it emerges from bankruptcy.
Reporter Gunnar Olson with Minnesota-based Thrifty Traveler telling WCCO's Adam Carter the health of Spirit has broad implications for all travelers, whether they like budget airlines or not.
"Many people would say, 'I would rather fly anybody other than Spirit,' but Spirit's existence is so important for you as a traveler, whether you're a Delta first class traveler or someone who's just looking for the cheapest flight," says Olson. "The existence of Spirit, the health of these ultra-low cost carriers, is what puts that competitive pressure on Delta."
Olson says if Spirit goes under, travelers will likely pay higher airfares.
"For people who are cheering for Spirit's demise, I think that you're going to end up paying more in the end. This is definitely not a good thing for travelers," Olson adds.
The ultra low-cost carrier filed for bankruptcy protection in August for the second time in less than a year and was aiming to exit in late spring or early summer after striking a preliminary deal with lenders. That plan was quickly disrupted when U.S. and Israeli strikes on Iran sent oil prices soaring above $100 a barrel, with jet fuel costs doubling in some markets as the fighting in the Middle East continues to disrupt global oil supplies.
Spirit’s relatively young fleet has made it an attractive acquisition target. But previous buyout attempts from budget rivals like JetBlue and Frontier were unsuccessful both before and during Spirit’s first bankruptcy.
Government bailouts aren't new, even when it comes to airlines. But most of them are typically industry-wide which has happened previously with U.S. automakers, and even banks. A bailout for a single company followed by ownership, is something else entirely.
There's even rare bipartisanship agreement in the Senate skeptical of the deal. Democratic Senators Elizabeth Warren and Republican Ted Cruz appear to be on the same page, both appearing skeptical of this deal. Cruz called it "absolutely terrible."
"There appear to be very few rational reasons why the government would want to bail Spirit out," said Brian Summers, who tracks airline financials for the Airline Observer. "What's in it for taxpayers? There is not a lot in this for taxpayers. Sometimes airlines are just un-savable, and that appears to be the case here."
Flight prices, and baggage fees, are already high with airlines clearly putting the cost of rising fuel costs on consumers. Scott Kirby, CEO of United Airlines, has warned that this summer, fliers may see the airline’s fares rise by 15% to 20%. On a financial call with reporters on Wednesday, Kirby shared what is basically bad news for travelers.
“I think it is more likely than not this time, and certainly the longer this (rising fuel prices) lasts, the higher the probability goes that the pricing increases hold,” Kirby said.
Trump did not offer details on what type of government aid could be provided. But asked separately on Tuesday about potential government relief, Duffy told reporters that the president had directed the department to review possible options.
“He’s directed us to take a look. I’ll have a conversation with the president later today,” Duffy said, adding that he was also meeting with some of the budget carriers later Tuesday.
Congress has stepped in to authorize federal support for airlines before, most notably after the Sept. 11 terrorist attacks and during the COVID-19 pandemic.
Already weakened by soft domestic demand and persistent losses, especially since the pandemic, Spirit has come under growing financial strain as the higher fuel costs have added fresh uncertainty about its ability to continue operating.
