Flying Spirit Airlines has come with the philosophy of "you get the lowest fare possible, and everything else costs extra." That is not merely a pricing model. Apparently, it has been the government's way of doing business lately. The government promises it won't cost that much, it hides the true costs, and when the system fails (as it often does), tack on extra costs in the form of subsidies, tax credits, bailouts, and "emergency" spending. President Trump's proposal to bail out Spirit Airlines is not an anomaly. It would be another line item in a very long balance sheet of the U.S. federal government.
I think the first point to mention is that we would not be in this mess if the government did not intervene in the first place. Spirit Airlines was looking to merge with Jet Blue in 2024. But guess what happened? The Biden administration blocked the merger. American Action Forum President Douglas Holtz-Eakin said that there were already private-sector solutions of mergers or bankruptcy. A bailout is not necessary.
More than being unnecessary, it harms the airline industry. As Competitive Enterprise Institute Director of Technology & Innovation Jessica Melugin reminds us, blocking the merger of smaller competitors to scale up when the industry is dominated by four major airlines makes little sense. CEI Policy Analyst Steve Swedberg details how the airline industry is suffering from a lack of competition and how competition helps keep the airline industry thriving instead of stagnating. All this bailout would do is have the airline industry flounder while making sure the Big Four (Delta, American, United, and Southwest) maintain their 70-plus-percent market share over the industry.
As Holtz-Eakin is right to mention, this is reminiscent of the Soviet Union. Trump is using the power of the state to allocate capital. It does not take much imagination to see how political interference could get in the way of Spirit's management and operational decisions.
Senior Fellow John Berlau points out, this sort of bailout creates a moral hazard because it incentivizes companies like Spirit Airlines to take excessive risks. Why should the taxpayers have to pay to bail out a failing airline, especially when there are other remedies available? This won't stop at Spirit. As a matter of fact, Frontier and Avelo are already seeking $2.5 billion in bailouts, as well.
Cato Institute policy scholar Ted DeHaven illustrates how the Defense Production Act (DPA) angle to provide this Spirit bailout borders on the absurd. DPA is aimed at reducing shortfalls in goods essential to national defense. This is the Trump administration pursuing a bailout under the guise of bailouts, much like it has pursued tariffs on trucks and furniture under a flimsy national security argument. At least with other bailouts that I did not agree with, there was at least an argument of systemic risk. There is no such pretext. It is simply a first step towards greater nationalization of the airline industry.
Strip away the rhetoric and the proposal is hard to justify on any grounds. The government creates the conditions for Spirit's instability, blocks private-sector measures to remedy it, and comes in to "fix" the problem that it caused in the first place. This decision distorts competitive markets, rewards risky behavior, and invites a litany of companies to beg for a handout and corporate welfare in the name of "national security."
The bailout is not a solution. It merely masks an issue while expecting the taxpayers to clean up the mess. If a company is not doing well, it should be allowed to fail. If it wants to stay alive, that is what bankruptcy, restructuring, and acquisition are there for. The state is blocking voluntary exchange while preventing firms from adapting. It is a sober reminder that it does not matter who is in the White House. The underlying hubristic assumption is the same: the government can outguess the markets and improve upon an economic system that is second to none.
Spirit Airlines has to earn your business. If it succumbs to incompetence, at least it costs them customers. It is worse with government because Spirit Airlines at least asks for your consent before charging you. Washington just reaches deeper in your wallet, keeps billing you for inane ideas like bailing out Spirit Airlines, and calls it reform. What ever happened to making airlines great again?
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