Low-Fare Airlines Seek Federal Bailout As Iran War Spikes Jet Fuel Prices: Report

Low-fare airlines have banded together and asked the Trump administration for a $2.5 billion bailout because of the rising cost of jet fuel spurred by the Iran war.

The Association of Value Airlines (AVA), a trade organization for value airlines, said that its members were working collaboratively and looking for help from the Trump administration. Last week, member air carriers, which include Spirit, Frontier, Avelo Air, Allegiant Air, and Sun Country, met with Transportation Secretary Sean Duffy.

AVA says that it has asked for the creation of a $2.5 billion liquidity pool to be used only to offset “incremental fuel costs, as a necessary and targeted measure to stabilize operations and keep airfares affordable.” The statement notes that, since February, jet fuel prices have risen nearly 100 percent.

Since the start of the Iran war, jet fuel, as well as the price of gas, has risen as hostilities have disrupted supply chains and damaged infrastructure throughout the Middle East. Earlier this month, International Energy Agency Executive Director Fatih Birol, told the Associated Press that this was “the largest energy crisis we have ever faced.”

Among the arguments the AVA makes is that market intervention by the government to preserve competition during a crisis is not without precedent. “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 AVA said.

The New York Times reported that Spirit Airlines was also negotiating a $500 million loan from the Trump administration. Last week, in a bankruptcy hearing, Spirit’s attorney painted a bleak picture. “The cash actually available to Spirit to fund ongoing operations is not going to last for very much longer,” Spirit’s lawyer, Marshall Huebner of the law firm Davis Polk & Wardwell, said.

In a statement, to the New York Times, the White House acknowledged the broader request made by budget airlines. “The White House is aware of outreach that was made by a group of budget airlines to the Department of Transportation, and the administration continues to monitor the health of the U.S. aviation industry for passengers and airline employees,” Kush Desai, a White House spokesman, said.

The AVA framed its members as being crucial to keeping airfare affordable.

“Value airlines also keep fares competitive across the country, with an average base fare of $111, which is over two times more affordable than a ticket on one of the high-fare airlines,” the AVA said.

Rising jet fuel costs has impacted other carriers as well, with numerous carriers announcing reductions in routes. Air Canada recently announced that it would, at least temporarily, be ending several U.S. routes.

Bloomberg News reported that United Airlines had announced a 5 percent reduction in capacity, while Delta airlines announced a 3.5 reduction and price increases.