Kevin Hassett, the Director of the White House National Economic Council, addressed the fallout from Spirit Airlines' (OTC:FLYYQ) collapse, weighing on how the Iran conflict and surging fuel costs could pressure airline profits.
Hassett stated that the energy shocks from the Iran war could affect airline profits for a quarter. However, he noted that other airlines remain operational and healthy due to their strategic hedging of jet fuel purchases, which helps to mitigate the impact of short-term energy shocks.
"Certainly, it'll affect profits for the airlines for a quarter or so, but they're very, very healthy right now," Hassett said.
Regarding Spirit’s closure, Hassett said the airline’s business model was not viable, leading to its liquidation by creditors.
Hassett added that, along with Transportation Secretary Sean Duffy, he has been working to ensure that passengers affected by Spirit’s sudden shutdown can return home safely. They have been coordinating with other airlines such as American Airlines Group (NASDAQ:AAL), United Airlines Holdings Inc. (NASDAQ:UAL) and Southwest Airlines Co. (NYSE:LUV) to assist stranded passengers and offer them lower fares for their return journeys.
Spirit Collapse Sparks Bailout Debate
Spirit Airlines ceased operations on Saturday after its creditors rejected a U.S. government rescue plan. The company had pointed to increased jet fuel costs, caused by the closure of the Strait of Hormuz, as a significant factor in its decision to cease operations.
President Donald Trump‘s idea of rescuing the beleaguered airlines was met with skepticism from Duffy, as well as other lawmakers like Sen. Elizabeth Warren (D-Mass.). Pushing back on CEO Dave Davis‘ remarks about the Iran war causing an impediment to the recovery plan of the airlines, Duffy stated that Spirit was already in a precarious position before the Iran war. The airline had filed for bankruptcy multiple times, and its business model was not working, said Duffy.
Meanwhile, Transportation policy analyst Marc Scribner argued that shareholders and lenders, not taxpayers, should bear Spirit’s risks. According to Scribner, supporting the “financial zombie” airline with a government loan, or worse, taking ownership, would be a “bad” investment.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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