Transportation Secretary Sean Duffy announced Saturday that the federal government will not provide financial assistance to budget airlines requesting $2.5 billion in relief amid soaring jet fuel costs.
Speaking at a Newark airport news conference following Spirit Airlines’ recent collapse, Duffy explained his position on government intervention in the airline industry.
“I would say that at this point, I don’t think it’s necessary. They do have access to cash. If they want to come to the U.S. government, we would be a lender of last resort. If they can find dollars in the private markets — I think that’s better for them,” Duffy stated.
The Transportation Secretary suggested that Spirit’s financial troubles created an opening for other carriers to seek federal funds “not necessarily based on need, but based on opportunity.”
Earlier this week, multiple discount airlines including Frontier and Avelo submitted a proposal through the Association of Value Airlines requesting government assistance. Their plan would exchange warrants convertible to equity stakes for $2.5 billion in federal aid.
The association formally requested the Trump administration establish a $2.5 billion liquidity fund specifically designed to help offset increased fuel expenses “as a necessary and targeted measure to stabilize operations and keep airfares affordable during this period of volatility.”
Additionally, these carriers have petitioned Congress to temporarily eliminate the 7.5% federal tax on airline tickets and the $5.30 per-segment fee. Removing these charges would cover approximately one-third of the additional fuel expenses airlines are facing.
The funding request stems from an unexpected result of the U.S.-Israeli conflict with Iran: dramatically increased jet fuel prices that have roughly doubled operational costs, creating financial pressure that has pushed vulnerable airlines toward potential bankruptcy.
Last week in Washington, chief executives from multiple low-cost airlines met with Duffy and Federal Aviation Administration Administrator Bryan Bedford to present their assistance proposal.
The airlines calculated their $2.5 billion request by estimating how much additional fuel costs they anticipate paying this year compared to their original projections.
Airlines for America, representing major U.S. passenger carriers, voiced strong opposition to any bailout for budget airlines, arguing that “government intervention on behalf of those airlines would punish other airlines that have engaged in self-help in order to deal with increased costs and reward airlines who haven’t made those tough decisions. That’s not a level playing field.”
The organization further contended that long-term support for companies unable to cover their capital costs would ultimately harm both competition and consumers by creating obstacles for other airlines trying to compete and secure private investment.
