The conservative Wall Street Journal editorial board took a swing at President Donald Trump for his swiftly developing plan to have the federal government effectively buy Spirit Airlines to prevent it from liquidating — a move already condemned by multiple Republican lawmakers.
The idea, they warned, has "no economic justification" — and would set a terrible precedent for markets.
"Spirit is getting slammed by soaring prices for jet fuel because of the war in Iran," wrote the board. "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?"
Notably, the board continued, Spirit's current mess is partly the fault of the federal government in the first place.
"More than a decade of low interest rates let Spirit load up on debt and expand," they wrote. "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."
The airline pursued a merger to stave off bankruptcy, first with Frontier and then with JetBlue, only to be rebuffed in an antitrust case.
"Spirit used bankruptcy in 2024 to restructure its debt, but the competitive dynamics didn’t change," wrote the board. "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 upshot, the board concluded, is that "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 airways."