OPINION:
Taxpayers might end up on the hook for a half-billion-dollar bailout of failed Spirit Airlines.
Sky-high fuel costs resulting from the Iran war helped push the financially troubled carrier over the edge, but that’s no reason for the federal government to sign a lousy “deal” and foist yet another bill onto the backs of taxpayers.
Spirit Airlines is in active talks with the Trump administration to hammer out an agreement in which the bankrupt company can borrow hundreds of millions of taxpayer dollars in exchange for stock warrants that could give the government a controlling interest.
This is a terrible idea for both the airline industry and taxpayers.
The government cannot run anything efficiently, especially something as logistically complex as an airline. Just look at how the U.S. Postal Service is mismanaged. If the government becomes a majority shareholder of Spirit Airlines, then, rest assured, the mismanagement will be just as bad.
Additionally, this bailout would add to the company’s existing multibillion-dollar debt burden without making any structural changes to the business. Unlike previous actions taken since the company entered bankruptcy, such as selling planes or raising fares, this taxpayer-funded bailout doesn’t address market conditions (in this case, higher fuel prices).
So, if jet fuel prices stay elevated for a while, Spirit Airlines will be back at the White House, hat in hand, asking for more money from the already strapped taxpayer, as other airlines are now rumored to be doing.
The bailout is also a terrible deal for the broader airline industry. Free markets allow failed companies to go out of business, with their assets sold to profitable firms and market share going to those who best meet customers’ needs at the lowest prices. Bailouts keep dead wood around instead of clearing it out, suffocating healthy growth.
Spirit Airlines would know; its “service” has been the butt of late-night jokes for years.
It would also set a dangerous precedent, because it’s not just Spirit Airlines’ bottom line that is being hammered by skyrocketing jet fuel prices. American Airlines recently cut its outlook on estimates that its fuel costs would be an eye-watering $4 billion higher. If Spirit Airlines gets backstopped by Uncle Sam, then American Airlines will want equal treatment.
It’s a Pandora’s box that we had best not open.
Sadly, this whole situation could have easily been avoided. I wrote in 2023 and 2024 about the Biden administration suing to block the merger of Spirit Airlines and JetBlue Airways, predicting that the former was likely doomed as a consequence. By November 2024, it filed for Chapter 11 bankruptcy. It emerged in March 2025 after a rapid restructuring but filed again in August 2025.
There was no legitimate reason to block the merger. The two companies’ combined market share would have been merely 10%. United Airlines would have been about 50% larger and American Airlines about 70% larger. The antitrust arguments of the Biden administration were total nonsense.
If the airlines had been allowed to merge, then the resulting company would have undoubtedly been in a better financial position than Spirit Airlines is today and better able to weather stratospheric fuel costs.
Regardless, a failure of the Biden administration is not a good reason to make another mistake. Throwing good money after bad would be a case of the sunk-cost fallacy. Spirit Airlines should be allowed to fail, and taxpayers should not be on the hook for bailing it out.
The too-big-to-fail mentality is a plague on the American free market system. Of course, bankruptcies often lead to temporary job losses, but allowing bad businesses to fail clears the way for new or better businesses with more jobs and better pay because they are, well, better.
Temporarily preserving some jobs is not worth the massive moral hazard created by bailing out failures, creating an incentive for insolvency and a penalty for prudence.
Occasionally, government intervention in markets might be warranted, such as when national security is at stake or when adjudicating property rights disputes is necessary. That’s not what is happening here.
There is simply no justification for bailing out a failed airline. The Trump administration should pass on this “deal.”
• E.J. Antoni, Ph.D., is chief economist and the Richard Aster fellow at The Heritage Foundation and a senior fellow at Unleash Prosperity.
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