Spirit Airlines close to a $500M Trump bailout

[0:00] Well, there is a common enemy unifying U.S. lawmakers on Capitol Hill who normally disagree. [0:07] That enemy is a proposed big government bailout for Spirit Airlines worth half a billion dollars. [0:15] Pete Muntean here to talk about that. [0:18] Pete is an example of the unity that I was just alluding to there. [0:22] Senators Ted Cruz and Elizabeth Warren, no less, a right-wing Trump loyalist and a very progressive Democrat, [0:32] both up in arms calling this a terrible idea and asking what do the American people get out of this? [0:40] So is there an explanation for the Trump administration's reasoning in bailing out Spirit at this point? [0:45] It really begs the question about whether or not this is indeed a good idea. [0:50] A half billion dollars, $500 million, with more developments on this story all the time. [0:55] You know, President Trump opened the door to a possible bailout on Tuesday. [0:58] Wednesday, a source told us that the Trump administration was in advanced talks. [1:02] And now we're told a deal could come as soon as today here in the United States. [1:07] The newest wrinkle here is that this is facing some pretty big pushback in Trump's own party, [1:12] with some calling this idea the nationalization of Spirit Airlines and that it verges on socialism. [1:22] Here's what we're talking about. [1:23] A source close to these talks tells us the federal government's considering a $500 million bailout of Spirit Airlines. [1:28] Do you would include the federal government taking a stake in the airline? [1:31] You have to remember, Spirit Airlines is an ultra-low-cost carrier where everything is extra, similar to Ryanair in Europe. [1:39] Struggled to make some money, though, since the COVID pandemic. [1:42] JetBlue tried to acquire Spirit in July 2022. [1:46] That deal fell apart when the Biden administration said it would spoil competition. [1:51] Then in November 2024, Spirit filed for Chapter 11 bankruptcy. [1:55] And last March, Spirit emerged from bankruptcy, but just said a few months later that it would struggle to stay afloat for another year. [2:03] Which brings us to now. [2:05] The rise in fuel costs due to the war with Iran really has Spirit on the ropes. [2:10] Well, I understand the airline is bankrupt because the previous administration blocked the merger, which was probably not a wise move. [2:18] Obviously, this is something the Commerce Department and the president are tracking. [2:22] I don't have any updates or announcements, but the aviation industry is very important to this president. [2:28] In this White House, millions of Americans depend on it. [2:30] We want to see the best possible outcome. [2:33] So clearly, this could be a huge economic event, any way you slice it. [2:36] If the federal government bails out Spirit Airlines, that would be big, potentially saving about 14,000 jobs. [2:44] It's also a huge deal for passengers. [2:46] If they have travel booked on Spirit Airlines, we're about to go into the huge summer travel season. [2:51] And also begs mentioning that a lot of people have credits on Spirit Airlines. [2:55] So there's some big questions about what would happen to that. [2:58] Still a lot to play out here, Becky. [3:00] We're only sort of in the genesis of this idea. [3:03] And Trump really favors himself as a bit of a dealmaker. [3:07] So we'll see if this is really an attempt to save face as this war with Iran is really having huge ripple effects, not only here, but also everywhere else. [3:20] Joining me now, Nick Ewan. [3:21] He's editor-in-chief for The Points Guy. [3:24] You guys keep an eye on the industry. [3:26] And I think we're trying to figure out, is this a case of spirit problems versus war in Iran, fuel, and overall airline vulnerability? [3:35] Here's what President Trump said when he called into CNBC about Spirit. [3:43] Spirit's in trouble. [3:45] And I'd love somebody to buy Spirit. [3:46] It's 14,000 jobs. [3:49] And maybe the federal government should help that one out. [3:51] You know, I tell my people. [3:52] And then the response from senators on both sides of the aisle is frustration. [3:59] I think, honestly, they're just triggered by the word bailout, which, fair. [4:02] You had Ted Cruz saying this is an absolutely terrible idea. [4:07] You had Elizabeth Warren saying, yeah, what would the American people get out of this? [4:11] So, first, how realistic do you think this is? [4:15] Well, I think Spirit is in really tough financial position right now. [4:19] So I do think that it is very possible that the government could pursue this because there are a number of jobs. [4:26] And Spirit, as a low-cost airline, does exert competitive pressure on other airlines to keep their fares low. [4:32] But right now, their financial position is so dire that without any support or an outside investor coming in, [4:40] it could really be challenging for them to stay afloat and continue running their operations. [4:45] The Wall Street Journal is reporting that Trump actually met with the Transportation Secretary, Sean Duffy, [4:50] and also the Commerce Secretary, Howard Lutnick. [4:53] And then later, they were saying, look, we don't want to put good money after bad. [4:58] He says there's been a lot of money thrown at Spirit. [5:00] They haven't found their way into profitability. [5:03] And so would we just forestall the inevitable and then own that? [5:07] That's a good question. [5:08] Can you talk about how the industry thinks about that? [5:10] Yeah, of course. [5:12] The bottom line is that Spirit has to find a pathway towards longer-term success. [5:18] Now, that could be that the government takes a temporary stake, [5:20] and then ultimately there is some consolidation in the industry. [5:23] Of course, the piece earlier referenced the proposed merger between JetBlue and Spirit. [5:28] That was blocked and ultimately halted by a judge. [5:31] But at the end of the day, Spirit has to figure out what the future looks like in order to be successful. [5:36] And that's likely what the government would be looking at, [5:39] is this is not just about injecting cash. [5:41] This is about a long-term plan towards financial viability. [5:45] And that's going to be the key thing that would move any of these conversations forward. [5:50] Is this war destabilizing companies in the industry that are already vulnerable? [5:59] Well, that's exactly what's happened with Spirit. [6:01] Spirit was already in a really tough financial spot. [6:04] Number of factors contributing to that, including increased leasing costs, [6:08] some engine issues they had, and just their overall operating model. [6:11] They've been struggling a lot coming out of the COVID pandemic. [6:15] We have seen other airlines have similar issues, [6:17] but they haven't gotten to the point of being on the brink of liquidation. [6:22] They are larger. [6:22] They have joint venture partners, other airline partners that can offer essentially [6:27] a lifeline by funneling passengers and offering a broader route network. [6:31] So right now, Spirit is relatively unique. [6:35] But this could, depending on how long this continues, [6:38] really have a drag on airline financial success. [6:42] And down the road, we could start to see others get into a more precarious situation. [6:47] In the meantime, it seems like they're raising prices. [6:50] Maybe I'm misreading it from my trauma from my spring break [6:53] and being in the airport during the TSA meltdown. [6:56] But prices are up 20%. [6:58] That's not 2% or 4%. [7:00] That's a lot, especially for those coach travelers. [7:03] Can you talk about, realistically, during this war, [7:07] what our travel budgets are going to look like? [7:11] Yeah, that's an unfortunate reality. [7:13] Jet fuel tends to be the second largest expense for an airline, aside from labor. [7:18] So if you see these hugely increased prices, [7:20] you're talking about hundreds of millions of dollars in added expenses. [7:24] And that can really eat into an airline's profit. [7:27] They're going to do everything they can to not pass along those costs to customers [7:32] because they know that demand is highly dependent on pricing. [7:36] But at some point, they have to. [7:38] And that's what we're already starting to see. [7:40] So there's a combination of increased prices, [7:42] as well as some small but still significant cutbacks [7:46] to some routes that are maybe unprofitable, [7:49] that aren't fully fleshed out with demand. [7:52] So it is having a real broad impact. [7:55] If you haven't booked your summer travel, [7:57] I would say go ahead and do so now. [7:59] Lock in a flight before it gets even more expensive. [8:03] Because right now, with no clear end in sight to this conflict, [8:06] we just don't know where prices are going to stop. [8:10] They could continue to increase in the weeks and months to come. [8:13] All right. [8:14] That's Nick Ewan at The Points Guy. [8:16] Thank you. [8:16] Thank you. [8:16] Thank you.