Spirit Airlines wasn’t the kind of institution that “too big to fail” was coined to describe. However, the beleaguered low-cost airline is considering offering an equity stake to the federal government in exchange for a cash injection to avoid potential liquidation. Executives from Spirit and other low-cost carriers are set to meet with Transportation Secretary Sean Duffy next week to discuss the state of their business amid the spike in jet fuel prices.
Spirit was in trouble long before tanker traffic through the Strait of Hormuz became a target in the latest forever war. The canary-yellow airline filed for bankruptcy twice last year. Restructuring will leave Spirit with $2 billion in debt and just 80 planes in its fleet. According to Bloomberg, Spirit’s competitors are likely to push back against any government aid because they are also struggling with high fuel prices. Why should Spirit be the only carrier to get government assistance? The Association of Value Airlines, a low-cost carrier trade group including Spirit, sent a letter last week to Congress proposing several temporary relief measures. Most notably, the association proposed a temporary suspension of the 7.5% federal excise tax on airline tickets.
Trump wants somebody to save Spirit Airlines
The White House indicated that it could help Spirit Airlines avoid collapse. President Donald Trump said in an interview with CNBC, “I don’t mind mergers. I think I’d love somebody to buy Spirit, as an example. Spirit’s in trouble and I’d love somebody to buy Spirit. It’s 14,000 jobs and maybe the federal government should help that one out.” However, the hint at corporate welfare didn’t come without blame. A USDOT spokesperson did point a finger at the Biden administration for a federal judge blocking JetBlue’s acquisition of Spirit in 2024.
While Trump is warm to an airline merging with Spirit, he’s not so keen on the mega deal floated by United CEO Scott Kirby last week. The executive proposed that United Airlines merge with American Airlines to form the world’s largest carrier. Trump commented, “I know them both very well, I don’t like it.” While United-American would be a competitive player in international air travel, the merger would likely lead to domestic ticket prices soaring due to a lack of competition.
