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A group of US low-cost airlines, including Frontier and Avelo, has proposed a USD 2.5 billion government support package to offset rising jet fuel costs. The request, which involves issuing equity-linked warrants, comes as fuel prices remain elevated and continue to pressure airline margins. Discussions with US aviation authorities are ongoing. The move also follows broader stress in the aviation sector, with potential support being considered for Spirit Airlines. The situation reflects lingering financial strain on budget carriers, similar to earlier industry challenges seen during the COVID-19 period.
A group of US budget airlines, including Frontier Airlines and Avelo Airlines, has approached the US government with a proposal seeking USD 2.5 billion in financial support. In return, the airlines have offered warrants that could later be converted into equity stakes, according to a report. Advertisement
Senior executives from several low-cost carriers recently held discussions in Washington with Sean Duffy and Bryan Bedford. The talks focused on a potential relief package, with further discussions expected to continue over the coming days.
The proposed amount of USD 2.5 billion has been calculated based on the additional fuel expenses airlines expect to incur this year compared to earlier projections. This estimate assumes that jet fuel prices will remain above USD 4 per gallon on average, significantly impacting operating costs.
While there has been no official confirmation from authorities, a response from the White House and Frontier was not immediately available. Avelo, in its response, did not directly comment on the proposal but stated that it strongly believed a healthy and competitive airline industry remains important to the US economy, especially at a time when fuel prices are high.
The proposal comes at a time when the aviation sector is dealing with rising cost pressures, partly linked to geopolitical tensions involving Iran, which have led to a sharp increase in jet fuel prices. This has nearly doubled fuel-related expenses for some carriers, putting pressure on profitability and pushing smaller airlines into a more vulnerable position.
In parallel, the US administration is also close to finalising a separate support plan for Spirit Airlines. The proposed package could include up to USD 500 million in government-backed financing aimed at helping the airline continue operations during bankruptcy proceedings.
This is not the first time the US government has extended financial support to the aviation sector. During the COVID-19 pandemic, the US Treasury provided USD 54 billion in aid to major airlines in exchange for warrants. However, the returns from these warrants were limited, with only USD 556.7 million recovered through their sale, as many failed to generate significant value.
Source Reuters
5th Jun, 2025
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