The Trump administration says it is strongly considering either bailing out Spirit Airlines with a loan of a half-a-billion dollars in taxpayer money — and with the government taking an equity stake in it as high as 90 percent – or outright buying it, finding someone to operate it, then selling it a “profit” once oil prices decline.
It’s a horrible idea. And the chorus is growing, no matter what political persuasion, just how horrid the prospect is.
Yes, we understand that Spirit currently is the only carrier flying out of Arnold Palmer Regional Airport in Westmoreland County’s Unity Township, just southwest of Latrobe. And as much as we want to root for the proverbial home team and its 14,000 system-wide employees, the facts – on the ground and in the air — say it’s not very wise.
Spirit, an “ultra-low cost” carrier (based in Dania Beach, Fla.) that quickly works to negate that moniker by jacking up costs with onerous extra fees, is in Chapter 11 bankruptcy for the second time in less than two years. And, frankly, it’s better known for its disservice to customers than its service.
While a near-doubling of jet fuel costs because of the Iran war certainly has not helped Spirit’s cause, it’s generally agreed that a rudderless Spirit consistently has not found a flight path out of its downward spiral. “Dead in the water” is an apropos term.
Or as analyst Savanthi Syth of Raymond James put it to Fortune magazine, “Spirit was in limbo for almost two years, where they didn’t make hard decisions. They’d be in a better place today if they’d been able to spend less time without a direction and more time moving in the right direction.”
A merger with another low-cost carrier, Jet Blue, was inexplicably scuttled on anti-competition grounds by the previous administration. And Spirit has struggled to even tread water since then that.
Syth also notes for Fortune that a badly crippled Spirit is heading into the slow, pre-summer May season when the industry’s bookings and revenues fall.
“Even before the war, we thought it was highly likely [that Spirit would] have to liquidate in the May timeframe,” she said, adding that a bailout would keep Spirit airborne, but “make the futures of JetBlue and Frontier more precarious.”
Nothing like attempting to compete with the taxpayers’ ward. And we can only wonder if JetBlue and Frontier will hold their palms out for a taxpayer greasing if Spirit gets one.
And that, Syth told Fortune, could make things worse for the people that a bailout supposedly would help, the flying public.
Syth says the best solution to the Spirit question is to forget a taxpayer bailout and convince rival airlines to honor Spirit tickets on their own flights. Then, they’ll eagerly lease and purchase its planes in a super-tight market for jets, claim its routes and hire its pilots and flight attendants.
“Losing a low-cost competitor is unfortunate and would, at least for a while, increase concentration in a business where sundry routes offer just one or two competitors. But the best flight path is letting the market work,” Fortune concludes.
And that means letting Spirit fail.
But wait, there’s more. Writing at viewfromthewing.com, Gary Leff argues that the kind of taxpayer bailout being proposed would be illegal (the en masse Covid-era bailouts notwithstanding).
“Without new legislation from Congress, there’s just no legal authority to extend loans to private businesses like this,” Leff writes. “Appropriations can only be used for things Congress made them for.
“The government can’t make obligations that they don’t have appropriations for. Under the Federal Credit Reform Act, loans and loan guarantees require budget authority.”
Oh, and there’s also no national security need to save Spirit, other analysts argue.
If there’s a market for such flights at Palmer Regional, where subsidies already are available to prop up airlines, other carriers will attempt to take advantage of that and then risk their own money in pursuit of profit.
But if not, there’s a far more serious question to consider: If there’s no Palmer market for larger passenger jet service — and with Pittsburgh International Airport so relatively close — can Palmer survive?
And should it?
One thing, however, is certain (and as The Wall Street Journal noted): ‘’[T]he U.S. doesn’t need an Amtrak of the airways.’’
Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).
