An industry group representing budget airlines such as Frontier has asked the Department of Transportation to create a $2.5 billion pool of money to help its member airlines because the price of jet fuel has nearly doubled since February, endangering their ability to stay in business. File Photo by CJ Gunther/EPA-EFE
April 27 (UPI) — An industry group that represents budget airlines has reached out to the Department of Transportation about creating a $2.5 billion pool to help keep them in business as the price of jet fuel remains high.
The Association of Value Airlines — which represents Allegiant Air, Avelo Air, Frontier Airlines, Spirit Airlines and Sun Country — said Monday that it has approached the Trump administration about the pool because an 88% increase in the cost of jet fuel is endangering their ability to do business, The Wall Street Journal and The New York Times reported.
Spirit Airlines itself has been negotiating a possible $500 million bailout from the federal government after warning that it is running out of cash that is separate from the AVA request.
Airlines worldwide started raising fees in March after the United States and Israel started the war in Iran, which led the country to blockade the Strait of Hormuz in response and has caused the price of gas and oil to increase significantly.
Fuel expenses account for about 30% of airline operating costs and even a sustained $1 increase in per barrel of oil can increase those costs by millions of dollars.
“Since February, jet fuel prices have increased by nearly 100% and are placing significant financial pressure on value airlines,” the industry group said in a statement.
It also said that the “liquidity pool” would be used “exclusively” to offset fuel costs that are expected to stay above $4 per gallon in North America for the rest of the year.
The AVA also has approached Congress about waiting a 7.5% excise tax and $5.30 per-segment fee that airlines pay the government for each passenger they transport for the same reason it asked the administration for the emergency pool.
President Donald Trump acknowledged last week that Spirit has been in conversation with his administration for a bailout as it has struggled to exit its second bankruptcy filing in a year.
Trump said that the discussions are ongoing, but that he would like to help keep Spirit in business because competition is good for consumers and he is concerned about job losses should it go out of business.
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