The Trump administrationis discussing a $500 million rescue deal for Spirit Airlinesthat could leave the federal government owning up to 90% of the company after it emerges from bankruptcy.
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That could help preserve a low-cost option for travelers. But experts warn it could create a problematic chain reaction, particularly when it comes to other struggling companies looking for financial relief.
“This equity stake stuff has opened up a Pandora’s box,” Tad DeHaven, a policy analyst at the libertarian Cato Institute, told NBC News on Wednesday.
DeHaven pointed toa growing list of government-backed equity dealsacross a range of industries over the past year that signal a broader expansion of federal involvement in private and public companies.
Those deals include equity-sharing agreements with semiconductor companies like Nvidia, Intel and AMD; mining firms such as MP Materials and USA Rare Earth; as well as nuclear energy and industrial companies like Westinghouse Electric Co. and U.S. Steel.
“Once you open that box,” DeHaven said, referring to those recent equity deals, it’s only a matter of time until “somebody is going to get in trouble, and they’re going to see that their [only] option to survive is to get money from the federal government.”
Wall Street is raising similar concerns. JPMorgan analyst Jamie Baker warned in a recent client note that “should the administration afford any sort of cash infusion, we believe JetBlue and Frontier would be inclined to quickly follow Spirit’s lead.”
The possible agreement also faced criticism in Washington. “This is an absolutely TERRIBLE idea,” Sen. Ted Cruz, R-Texas,posted on X. Cruz chairs the Senate Committee on Commerce, Science and Transportation. Fellow Republican Sen. Tom Cotton of Arkansascalled it“not the best use of taxpayer dollars.”
The White House, meanwhile, said it is actively monitoring the situation, along with “the overall health” of the U.S. aviation industry.
Source: Drudge Report
