Spirit Airlines is reportedly asking the Trump administration for a taxpayer-funded bailout to avoid liquidation. The answer should be: no way.
Spirit Airlines Seeks Government Bailout As Financial Crisis Deepens
According to The Air Current, which first broke the story, Spirit Airlines has approached the Trump administration seeking hundreds of millions of dollars in emergency funding as it teeters on the brink of liquidation.
It would be easy to blame this on rising fuel costs tied to geopolitical instability. And yes, higher oil prices are clearly making things worse.
But this did not start with fuel. Let’s review how Spirit find itself having gone from one the most profitable U.S. carriers to one that is fighting for survival, then we’ll get to the bailout request.
Spirit’s ultra low-cost carrier model has been under pressure for years. What once worked in a market where legacy carriers refused to compete at the bottom has steadily unraveled.
American Airlines, Delta Air Lines, and United Airlines now offer basic economy fares that are often competitive on price, but come with a far more compelling overall product.
- better reliability
- more frequencies
- loyalty program benefits
- network connectivity
Spirit cannot match that.
At the same time, costs have risen:
- labor is more expensive
- airport fees remain high
- engine issues have disrupted operations
The model depends on being the absolute lowest-cost provider. When that advantage disappears, the math stops working.
Fuel is not the root cause…it’s merely the straw that broke the camel’s back.
Why A Bailout Makes Little Sense
There are moments when government intervention may be justified, particularly when systemic risk is involved. The early days of the pandemic were arguably one such moment, when the entire airline industry faced an external shock that threatened to shut down global air travel (though I think there should have been a lot more strings attached).
This is not that.
Spirit’s problems are not primarily the result of an external shock. They stem from a business model that no longer works in the current competitive and cost environment. Propping up a failing model with taxpayer dollars does not fix the underlying problem. It simply delays it…and will create line of beggars demanding similar treatment.
If Spirit receives a bailout, JetBlue, Frontier, and even American Airlines will be next.
At that point, you are no longer supporting an industry: you are subsidizing inefficiency.
The Competitive Argument Falls Short
There is one argument in favor of supporting Spirit that deserves consideration: competition.
Spirit has long acted as a price disciplinarian in the markets it serves, forcing larger carriers to keep fares in check. Here’s a perfect example:
That matters, indeed.
But the way I see it, if Spirit Airlines was just running these routes at a loss (and why else would it pull out), this pricing was currently not sustainable in the first place and is certainly not now in an environment of very high fuel prices.
Finally, speaking more generally, I want to remind my U.S. readers once again that your tax dollars and mine bailed out the carriers during the pandemic. After promising to “permanently” eliminate change fees, what have they done? Devalued loyalty programs and brought back change fees even on premium cabin tickets via so-called “basic” fares.
As Americans struggle to pay for household goods during a period of inflation, any talk of government bailouts (not that there is even any statutory authority for it right now) should be vanquished.
Sorry, but no. We bailed you out and you screwed us. NO. MORE. BAILOUTS.
CONCLUSION
Spirit Airlines is in serious trouble and may soon face liquidation, which none of us should celebrate.
But asking taxpayers to step in and rescue a failed business model is a step too far. There is a difference between supporting an industry during an unprecedented external crisis and bailing out a company that can no longer compete on its own merits.
Spirit’s situation is the latter. If the airline is to survive, it will need to do so through restructuring and adaptation, not a government lifeline.
image: Spirit
Before deregulation, if you couldn’t afford to fly, you adjusted your expectations and, if required after that, took alternate forms of transport (train, bus, car). The problem is that too many people believe that flying is an unalienable right, linking somehow with the pursuit of happiness. Time to disabuse the unwashed of that notion.
I never know whether to take what you write literally or not. Do you think flying should only be for the financially wealthy?
I totally agree. A Bail Out would ne a horrendous idea. But what I don’t understand is why Frontier isn’t facing similar issues.
I think they are…just not as dire. But they won’t make out of this high fuel cost environment.
AOC and Newsom can start Air USA and have some free seats for low income passengers.
Isn’t that basically what Ryanair does with €9 fares? If AOC started an airline, charged low income people less, and made a profit it seems like it would be a great American success story.
Spirit is in trouble, and changes certainly do need to be implemented. But beyond just Spirit job losses are the failure of small airports. Latrobe Pennsylvania will face closure without Spirit. More jobs lost. Attach strings whatever.
Let the Lord of World spend some tax dollars helpful projects unlike gaudy renovations and arches that we don’t need.
Well… what about Allegiant Airlines as they are in the middle of a merger with Sun Country Airlines? What’s everyone’s take on them among all this because arguably it looks like they’re bucking the trend.
Like the Covid Bailouts if the government offers Spirit a Bailout it’s going to be required to offer EVERY U S airline even those who aren’t struggling. During Covid 3 U S airlines had enough money to weather the pandemic storm without a Bailout. But to keep the playing field fare EVERY airline took their chunk of pie knowing it had low interest rates and 10yr to pay it back. Spirit Airlines Still Owes the US taxpayers its share of the COVID bailout and is using bankruptcy protection to shed its payback requirements. So the government needs to let this Dying Business Model go away. Unfortunately it will affect thousands of families with their demise. But the US government needs to worry about funding the FAA and the TSA before it goes out and bailout private company. Spirits needs its bond holders and creditors to Bailout themselves vs the US taxpayers.
I do agree the Pandemic was a different situatio, (and I still was not in favor of it) i firmly believe that the Government has no right to bail out a failing Airline. I have flown Spirit and live somewhere that has very limited Spirit service so it wont impact me in the least yet I will have to contribute to a bail out via Tax liability. My one flight on Spirit forever cured me of ever wanting to fly on them again. I do feel bad for the people that will lose thier jobs there will be other jobs available. We dont seem to be stressing about jobs lost in the US steel industry.
This administration has no issue printing money and driving up the deficit. $30B to Spirit is just a fraction of what is being wasted in Iran, and probably would lead to a more tangible benefit to American consumers. I get nothing when we drop bombs on Tehran, but when Spirit charges $49 to fly AUS-PHX, AA matches it and I save money.
Since the Trump administration put the final nail in Spirits coffin with the high fuel prices, maybe they could offer them a GM style bailout where they take an ownership stake
Agreed on the government bailout. What Spirit could do is approach the Stable-Genius-In-Chief, who could make a few phone calls to some of the billionaires who got gigantic tax breaks last year and ask then to contribute 5% of one year’s tax savings. That would keep Spirit afloat for years.
Matt, if there are to be any specific or industry-wide bailouts (whether loans or grants), it really should include stipulations that include worker and consumer protections (like an EU261, but for here), and prohibits stock buybacks. Otherwise, we’re just gonna further enrich the executives while everyone else gets screwed, tax payers included.
So mismanagement is rewarded by taxpayer money injection. Thats how you get more mismanagement. US AIR in the 80s and 90s is an example of that. If chapter 11 bankruptcy can’t solve it, chapter 7 will.
This is nonsense, it’s the government’s fault (specifically the Biden Administration) that Spirit found itself in this situation when they blocked the Jetblue merger on antitrust grounds. They would have had a 9% market share…In the end a bailout will cost the economy less than 10,000 employees going on unemployment, not to mention the cost of tickets skyrocketing which will be felt by the public, unlike a bailout.