A group of U.S. budget carriers, including Frontier and Avelo, is seeking $2.5 billion in government assistance in exchange for warrants that could later convert into equity stakes, company executives proposed this week.
Senior leaders from several low-cost airlines traveled to Washington last Tuesday for meetings with Transportation Secretary Sean Duffy and Federal Aviation Administration chief Bryan Bedford. Conversations about a potential aid package were described as ongoing and expected to continue in the coming days.
The $2.5 billion figure reflects the carriers' internal estimate of additional jet fuel spending for the year compared with earlier forecasts, on the assumption that jet fuel averages above $4 per gallon. The request is structured as government support provided in return for warrants - financial instruments that would give the government an option to obtain equity in the airlines at a later date.
At the time of reporting, there was no immediate independent verification of the parties' calculations. The White House, Frontier and Avelo did not respond to requests for comment.
The appeal from the budget group highlights a broader pressure point in the industry: an increase in jet fuel prices linked in the reporting to the Iran war launched by Washington, which has pushed fuel costs roughly double previous levels, squeezed airline margins and strained carriers with weaker balance sheets.
The aid request comes against the backdrop of a separate matter in which the administration is nearing a support package for Spirit Airlines. That potential rescue could include up to $500 million in government-backed financing to help the low-cost carrier continue operations through bankruptcy.
Historical precedent for this type of arrangement dates to the pandemic, when the U.S. Treasury accepted warrants from major carriers in exchange for assistance under a $54 billion support program. From those pandemic-era warrants, the Treasury ultimately collected $556.7 million in proceeds after selling the stakes, with many of the instruments yielding limited value.
Discussions between budget carriers and federal officials are continuing, and company executives expect additional talks in the days ahead. Details on timing, structure and any ultimate government participation have not been finalized.