Spirit Airlines was teetering on the verge of liquidation last week. Some sources said the low-cost carrier had only a week to live. President Donald Trump is now close to handing a $500 million loan to Spirit. However, this bailout would come with a catch. The federal government could be granted the power to potentially seize a significant stake in the airline. No private business would ever want to be partially nationalized, but Spirit doesn't really have any other options to remain in operation.
Trump's desire to save Spirit seemingly emerged out of the blue earlier this week. While dismissing a potential mega merger between United Airlines and American Airlines on Tuesday, he defended his love of deals and said, "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." According to The Wall Street Journal, the push to craft a bailout began after that. Trump met with Commerce Secretary Howard Lutnick and Transportation Secretary Sean Duffy on Tuesday night to hammer out rough details. The exact terms of Spirit's deal are still being negotiated.
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While it would be fantastic if the thousands of Spirit Airlines employees continue having their jobs, why is the federal government working so hard to save a single carrier? The spike in jet fuel prices caused by the U.S.-Israeli war against Iran is impacting every airline. Spirit is only the closest to collapse because of previous business decisions that led the airline to file for bankruptcy twice last year. The canary-yellow carrier still hasn't escaped the coal mine and exited the second bankruptcy proceedings.
Collectively, the low-cost carriers asked Congress for government relief last week. The Association of Value Airlines, of which Spirit is a member, requested a suspension of the 7.5% federal excise tax on airline tickets and the $5.30 per-segment tax. According to Reuters, the trade group claims that these suspensions would offset a third of the added jet fuel costs. Given that no one knows when tanker traffic through the Strait of Hormuz will return to normal, Spirit could be the least of Trump's problems when it comes to commercial aviation in the coming weeks.
