Budget airlines pitch US government aid under $2.5 billion relief plan

By David Shepardson

WASHINGTON, April 27 (Reuters) – A group of U.S. budget airlines, including Frontier and Avelo, has proposed exchanging warrants that could be converted into equity stakes for $2.5 billion in U.S. government assistance, the group confirmed Monday.

The chief executives of several low-cost carriers met with Transportation Secretary Sean Duffy and Federal Aviation Administration chief Bryan Bedford in Washington last Tuesday to discuss the proposal.

The Association of Value Airlines confirmed it asked President Donald Trump’s administration to create a $2.5 billion liquidity pool, used exclusively to offset incremental fuel costs “as a necessary and targeted measure to stabilize operations and keep airfares affordable during this period of volatility.”

The group added, “Smaller value airlines are disproportionately impacted by higher fuel prices” and noted that low-cost carriers have an average base fare of $111. It said that mainstream carriers charge more than twice as much on average.

The sources said the group arrived at the $2.5 billion figure by estimating how much more it expects to spend on jet fuel this year compared with earlier forecasts.

The pitch highlights one of the unintended consequences of the U.S.-Israeli war on Iran: a surge in jet fuel prices that has roughly doubled costs, squeezing margins and pushing weaker airlines closer to the brink.

The White House and Frontier did not respond to a request for comment.

A spokesperson for Avelo said the airline had no specific comment on the report. But the spokesperson said Avelo “emphatically agree(s) that a healthy airline industry with strong competition is important to the U.S. economy, especially during this period of high fuel prices.”

The Trump administration has been nearing a deal to rescue low-cost carrier Spirit Airlines, which could include up to $500 million in government-backed financing to help it continue operating through bankruptcy proceedings.

The government is expected to get warrants equal to 90% of Spirit’s equity in exchange for the financing.

During the COVID-19 pandemic, the U.S. Treasury received warrants in major airlines in exchange for aid under a $54 billion support program but ultimately collected just $556.7 million from selling them, as many proved to be of little value.

(Reporting by David Shepardson Chandni Shah in Bengaluru; Additional reporting by Heera Hari in Bengaluru; Editing by Sumana Nandy, Rashmi Aich, Joe Bavier and David Gregorio)