Budget airlines have requested a $2.5 billion relief package from the Trump administration following a meeting with Transportation Secretary Sean Duffy early last week. This comes as elevated jet fuel prices squeeze operations, and after President Trump confirmed late last week that a possible U.S. takeover of bankrupt Spirit Airlines is under consideration.
The Wall Street Journal reports that a group of budget airlines, including Frontier and Avelo, has requested federal support in exchange for convertible equity stakes in the airlines. The $2.5 billion figure is based on extra fuel costs if jet fuel prices remain above $4 per gallon through the second half of the year.
WSJ cited people familiar with the potential economic aid package and said talks will continue this week.
Trump last week told reporters that he likes "having a lot of airlines, so it's competitive." Plus, the optics of multiple airline failures that could result in thousands of job losses would be optically displeasing for the administration in the midterm election cycle.
Apparently, the request is separate from the potential taxpayer-funded takeover of Spirit, which Trump confirmed last week was a very real possibility "if the price was right."
Trump told reporters:
So we are looking at Spirit. It's in bankruptcy court. And we're looking, if we could get it for the right price, I'd do it to save the jobs.
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Budget carriers have been under tremendous strain since the U.S.-Iran conflict and the closure of the Hormuz chokepoint sent jet fuel prices in New York to $5 per gallon. It appears some of these airlines might not have been properly hedged against such a spike in fuel costs, which has squeezed margins and led to outlook downgrades.
Larger carriers such as United and American have also slashed outlooks because of surging fuel costs, though they say ticket and baggage fee hikes have helped offset some of the extra costs. We noted that Delta remains one of the best-positioned airlines due to its in-house oil refinery.
The S&P 500 Airline Index has struggled to recover and is down 13.5% from its high just before the conflict began.
During the Covid era, U.S. airlines received $54 billion in federal grants and loans to avert mass layoffs after air traffic nearly came to a standstill.