$2.5 Billion Bailout Request

Association executive director Jonathon Freye said the federal funds would help keep fares lower throughout the entire industry. “The market dominance of the country’s biggest airlines has never been greater, and smaller value airlines are disproportionately impacted by higher fuel prices,” the group said in a statement.

The $2.5 billion request is separate from the $500 million federal bailout being discussed to keep Spirit Airlines from halting operations. Spirit, which has struggled to make money since the pandemic, is going through its second bankruptcy court proceedings.

Government Response Divided

President Donald Trump signaled approval last week for Spirit’s $500 million federal bailout. However, the deal still needs support from its creditors — only two of Spirit’s three creditor groups have agreed to the package.

For the broader $2.5 billion bailout request, Transportation Secretary Sean Duffy told reporters Monday: “I don’t have that money.”

The wider budget airline bailout would need congressional approval, and major carriers are opposed. Airlines for America, the broader trade group representing most of the US industry, is not seeking a bailout. Major airlines including Delta, United, American, and Southwest have told investors in recent weeks that bookings remain strong, meaning they plan to recapture increased fuel costs through higher fares and fees.

Competitive Landscape

United Airlines CEO Scott Kirby made clear last week he doesn’t believe a bailout for Spirit or other small airlines is justified. “Well-run airlines are still solidly profitable even in this environment, as you can see from United,” Kirby said. “I don’t think this crisis anywhere near big enough to cause the need for an airline bailout.”

Discount carriers can’t raise fares as much as other airlines to cover costs. “We serve customers who are often times booking discretionary travel and might be more price sensitive,” Freye said. “It’s difficult for us to raise fares given who our customers are.”

Smaller airlines help keep overall US fares lower by forcing major carriers to offer a certain number of seats at no-frills “basic economy” prices.

Additional Measures Proposed

The Association of Value Airlines also asked Congress to pause passenger taxes and fees paid on every airline ticket. This measure could allow airlines to collect more revenue without driving up costs for passengers.

Historically, previous airline bailouts supported all US airlines, not a single carrier or group, and were in response to a paralyzed industry — such as when passengers were afraid to fly after terrorist attacks or during a pandemic — not due to increased costs and losses.

Source: CNN