Who could have imagined that the U.S. government would deem a budget airline too big to fail? Yet here we are, as President Trump is flying to the rescue of the beleaguered Spirit Airlines. This is a story of how one misconceived government intervention leads to another.

Spirit last summer declared bankruptcy for the second time in less than two years. A hefty debt load and challenging business model has made a turnaround difficult. The Biden antitrust cops closed one escape hatch by blocking its merger with JetBlue in 2024. Now Spirit is getting slammed by soaring prices for jet fuel because of the war in Iran.

All of this means that the no-frills carrier could have to liquidate and lay off some 14,000 workers. Enter Mr. Trump, who floated a bailout of Spirit in a CNBC interview this week. Press reports say his Administration is negotiating a rescue that would lend the carrier some $500 million in return for warrants to buy as much as 90% of equity in the company. Is this the revival of the Trump Shuttle, circa 1989?

The rescue model seems to be the federal bailout of General Motors and Chrysler amid the 2008-09 financial crisis. The government justified that bailout on the need to prevent collateral harm to suppliers. But Spirit’s failure wouldn’t damage industry supply chains. Other carriers could scoop up its jets, pilots and airport gate slots.

Amid the bailout talk, it’s worth recalling how government policies contributed to Spirit’s tailspin. More than a decade of low interest rates let Spirit load up on debt and expand. Spirit offered uber-low, unbundled fares, charging more for carry-ons and picking a seat in advance of boarding. No free pretzels.

Larger carriers followed with their own no-frills economy options, which spurred Spirit to further cut its prices to unprofitable levels. Rising interest rates and labor costs after the pandemic led to growing losses. A 2023 labor agreement with flight attendants boosted wages by more than 40% over two years.

JetBlue swooped in with a $3.8 billion merger bid that promised to keep Spirit afloat. But the Biden Justice Department sued to block the deal on the dubious rationale that it would reduce competition, never mind that both carriers lacked the scale on their own to compete with the giants. Combining gates, planes and pilots would have increased airline competition.

A federal judge blocked the merger in 2024, while acknowledging it would “allow for more vigorous competition with the Big Four, which carry most passengers in the country.” JetBlue and Spirit have continued to struggle. Neither has posted an annual profit since 2019.

Spirit used bankruptcy in 2024 to restructure its debt, but the competitive dynamics didn’t change. It filed for bankruptcy again last August. If Spirit now has to liquidate, shareholders and creditors would take big hits, but they also took a big risk. Lenders were rewarded commensurately with higher yields. Letting Spirit fail would be a useful lesson in market discipline.

The mooted Trump bailout would fuel moral hazard. Don’t be surprised if JetBlue seeks a rescue too. Government ownership would also lead to regulatory and political favoritism that harms competition. That’s no doubt why stocks of other airlines fell following reports of the Trump intervention.

Washington could wind up subsidizing Spirit’s money-losing business indefinitely. The Trump Shuttle didn’t succeed, and the U.S. doesn’t need an Amtrak of the airwaves.

LOOK UP WHAT THE NEW CEO IS GETTING PAID COULD BE PART OF THE PROBLEM.

When our Congress can't even come together to pass a bill that validates free and fair voting, which 80% of the population are in favor for, nothing else really matters does it?

We are circling faster and faster....

Ol dad

Let them fail.

We should have never bailed out the auto companies. By now we'd have new, competitive companies with better management building better vehicles.

Government should not be involved in any way.

This .....unions would have more than likely crumbled too

Leaving us with more affordable vechiles

Don't know, but it seems unions are all democrat backers.
Maybe now we won't back failed companies any more.
Haven't seen one our government took over ever make it.
Those we bailed out, are still democrat backers , even with the illogical thinking on their part.

Did you read the article?

Bigger dummy... our country has not known.

Bigger dummy... our country has not known.

Bigger dummy... our country has not known.