By Allyson Versprille and Danny LeeBloomberg
Budget airlines are banding together to ask President Donald Trump’s administration for $2.5 billion to help combat increasing jet fuel prices in exchange for warrants that would give the U.S. government the right to purchase equity stakes in the carriers, people familiar with the discussions said.
The Association of Value Airlines, which represents low-cost carriers including Frontier Group Holdings Inc. and Avelo Airlines Inc., is leading the talks on behalf of the airlines, said the people, who spoke on condition of anonymity because the matter is confidential.
The $2.5 billion figure was calculated using the expected fuel consumption of the group’s members for the remainder of the year and the additional amount they’re expecting to spend on jet fuel compared to earlier forecasts, one of the people said. The estimate assumes fuel prices will remain above $4 per gallon for the rest of 2026.
The funds would only be permitted to be used for fuel receipts and not for recapitalization, the person added.
The Association of Value Airlines confirmed in a statement Monday that it has “requested that the Administration consider a program that would create a $2.5 billion liquidity pool.” The money would be 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 said.
Temporary government aid would “preserve vital industry competition” amid spiking jet fuel prices that have strained low-cost carriers, the organization added.
Avelo earlier in the day said that while it had no specific comment on the request, “we emphatically agree that a healthy airline industry with strong competition is important to the U.S. economy, especially during this period of high fuel prices.” Frontier referred any questions to the Association of Value Airlines.
The White House didn’t immediately respond to a request for comment.
The request is separate from another being considered by the U.S. government to rescue Spirit Aviation Holdings Inc. from possible liquidation, an idea Trump has touted as a good investment for the country.
He told reporters last week that he was considering “bailing them out, or buying it,” adding that the U.S. would acquire it “virtually debt-free. They have some good aircraft and good assets.”
Bloomberg previously reported that the administration is working on a plan that would offer the airline as much as $500 million in financing in exchange for warrants to purchase up to 90% of Spirit once it emerges from bankruptcy. The agreement still isn’t finalized and could change.
It’s unclear how receptive the Trump administration is to the idea of offering assistance to the other budget carriers that aren’t in as dire of a position as Spirit.
Discussions about U.S. intervention to support the airline industry have proliferated amid uncertainty over Trump’s shifting statements on the Iran war and rising fuel prices as the Strait of Hormuz remains largely closed.
The industry is heading into months of uncertainty in what should have been a year of strong demand, with initial projections for a record $41 billion in earnings and 5.2 billion passengers.
Airlines globally are grappling with a doubling of kerosene costs. In the U.S., the pain is more acute with carriers not hedging prices, meaning they’re absorbing the jump in oil prices and the cost to refine it into jet fuel.
Rising concerns about the war’s impact come as larger U.S. airlines seek to lead consolidation efforts. United Airlines Holdings Inc. Chief Executive Officer Scott Kirby confirmed Monday that he approached rival American Airlines Group Inc. about a potential merger but that talks have ended. Bloomberg reported earlier in the month that Kirby had pitched the idea to Trump during a White House meeting in late February.
Trump has said he is not a supporter of that idea. American also said it is not interested in merging with United.
Chief executives of the low-cost carriers met last week with Transportation Secretary Sean Duffy, Federal Aviation Administration chief Bryan Bedford and Daniel Edwards, the principal deputy assistant secretary for aviation and international affairs at the Transportation Department, a person familiar with the meeting said. The airlines discussed the challenges they’re currently facing and possible mitigation measures.
The Association of Value Airlines has also asked congressional leaders for temporary relief from certain fees and taxes, including a suspension of the 7.5% federal excise tax on airline tickets, according to a copy of a letter seen by Bloomberg News.
The airlines’ proposal was reported earlier by the Wall Street Journal.