Donald Trump is facing a $2.5 billion bailout appeal from cut-price American airlines struggling to survive the brutal spike in jet fuel prices due to his unpopular war in Iran.
The U.S.-Israel-driven conflict in the Middle East, which is entering its third month, has shut down the Strait of Hormuz—the artery for roughly 20 percent of the world’s oil—sending Brent crude up about 44 percent to $105 a barrel and roughly doubling the price of jet fuel. Airlines have responded by canceling routes, hiking fares, and slapping on fresh baggage fees.
Now Frontier, Avelo, and other budget carriers are angling for federal cash in return for warrants that could hand the U.S. government an equity slice in the airlines, The Wall Street Journal reported.
The newspaper says the eye-watering sum was calculated based on how much extra the carriers expect to spend on fuel this year, assuming prices stay above $4 a gallon.
The low-cost crew were apparently buoyed by Trump, 79, who told reporters in the Oval Office on Thursday he liked “having a lot of airlines, so it’s competitive.”
Several low-cost CEOs last Tuesday lobbied Transportation Secretary Sean Duffy, 54, and Federal Aviation Administration boss Bryan Bedford face-to-face in D.C. This reportedly led transportation officials to escalate the pitch to the White House.
Talks between the airlines and the administration are expected to go on, according to the report.
The Wall Street Journal says the plea is a major “escalation” from the airlines’ earlier ask—a temporary tax break on plane tickets—and comes as the administration weighs throwing a separate lifeline to Spirit Airlines.
The troubled carrier is hammering out its own deal for a federal loan of up to $500 million, structured so that the warrants attached could ultimately convert into a meaningful Treasury foothold in the business.
The bigger players appear to be toughing it out. United and American both trimmed their full-year forecasts as the U.S.-Iran war drove fuel costs through the roof, but both told investors they had managed to push the bulk of those costs onto travelers via ticket prices.
The situation is reminiscent of the Covid-era industry rescue, when U.S. carriers were thrown $54 billion in federal aid between 2020 and 2021 to fend off mass layoffs during the pandemic. Washington auctioned the warrants off and netted the Treasury north of $550 million.
The Daily Beast has contacted the White House, the Transportation Department, Frontier Airlines, and Avelo Airlines for comment.
