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

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, two sources told Reuters.

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, which was first reported by the Wall Street Journal.

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 Iran war launched by Washington: 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 said it "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 move also comes as the Trump administration nears 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.