WASHINGTON — Ultra-low-cost U.S. airlines are seeking targeted government intervention to weather a sharp rise in jet fuel prices triggered by geopolitical conflict in the Middle East.
The Association of Value Airlines (AVA) confirmed Monday it has proposed that the Trump administration establish a $2.5 billion liquidity pool. The funds would be used only to cover the additional expenses stemming from fuel costs that have surged nearly 100 percent since late February. Industry calculations suggest prices have climbed from around $2.50 per gallon to more than $4 as the conflict with Iran has disrupted global energy markets.
In a statement, the trade group — whose full members are Allegiant Air, Avelo Airlines, Frontier Airlines, Spirit Airlines and Sun Country Airlines — described the measure as 'a necessary and targeted measure to stabilize operations and keep airfares affordable during this period of volatility.' The AVA noted that its carriers play a critical role in fostering competition, with average base fares of just $111, roughly half what larger network airlines typically charge.
The request follows an initial report by The Wall Street Journal. Sources indicated airline chief executives held meetings with Transportation Secretary Sean Duffy and FAA Administrator Bryan Bedford the previous week to outline the plan. Officials from the Department of Transportation have indicated Congress may need to be involved in approving any such assistance.
Under the framework discussed, participating airlines would issue warrants allowing the government to take equity positions, mirroring elements of the airline support packages rolled out during the COVID-19 pandemic via the CARES Act. The AVA highlighted this precedent, stressing that temporary support to preserve vital competition is not unprecedented and would ultimately benefit taxpayers if the warrants are exercised.
Fuel price volatility has hit the ultra-low-cost segment particularly hard. These carriers rely on high load factors and ancillary revenues while offering some of the industry’s lowest ticket prices. With limited ability to impose fuel surcharges on cost-conscious leisure travelers, the carriers warn that sustained high costs could force capacity reductions or fare increases that ripple across the market.
The $2.5 billion amount was derived from internal estimates of the extra fuel expenses AVA members anticipate for the remainder of 2026 if prices remain elevated. The group has additionally called on lawmakers to temporarily suspend the 7.5 percent federal excise tax on tickets along with per-segment fees, a move it believes could recoup about one-third of the added burden.
The appeal comes at a precarious time for one member in particular. Spirit Airlines, operating in bankruptcy protection, is pursuing a separate approximately $500 million federal lifeline. Court filings and sources suggest the carrier’s cash position is deteriorating rapidly, with liquidation a distinct possibility absent stabilization. That potential deal is also expected to involve significant government equity participation, possibly as high as a 90 percent stake according to some reports.
Aviation analysts say the dominance of the largest U.S. carriers has grown in recent years, making the survival of aggressive discounters important for consumers. Should the administration and Congress move forward, the liquidity support could help avoid immediate service cuts as the busy summer travel period nears.
The AVA indicated it plans to maintain dialogue with policymakers. Whether the proposal gains traction remains to be seen, but it underscores the airline industry’s continued sensitivity to external shocks years after the pandemic-era bailouts. For now, the ball is in the administration’s court to determine if such targeted relief aligns with broader economic and transportation priorities.