'Due to Surging Jet Fuel Prices'... U.S. LCCs Request $2.5 Billion in Federal Aid

As jet fuel prices have soared in the wake of the Iran war, U.S. low-cost carriers (LCCs) facing significant challenges have requested $2.5 billion (3.7 trillion won) in financial support from the federal government.

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According to the Wall Street Journal (WSJ) on April 27 (local time), U.S. LCCs including Frontier and Avelo met with U.S. Secretary of Transportation Sean Duffy and Federal Aviation Administration (FAA) Administrator Brian Bedford in Washington, D.C. on April 21 to deliver their request.

The LCC industry, struggling with management difficulties as jet fuel prices have surged due to the ongoing war, asked the government to provide financial support equivalent to their additional financial burden resulting from rising fuel costs. The requested funding amount was calculated based on the assumption that the average price of jet fuel would remain above $4 per gallon through the end of this year. In exchange for providing funds, the government would receive warrants.

This request comes as the government is reportedly considering a bailout to prevent Spirit Airlines from going bankrupt. Currently, the U.S. government is discussing a plan to provide Spirit Airlines with up to $500 million (740 billion won) in funding in exchange for securing warrants.

During the pandemic from 2020 to 2021, the U.S. federal government provided a total of $54 billion (79 trillion won) in bailouts and tax relief benefits to the airline industry.

Major U.S. airlines such as United Airlines and American Airlines have already passed on the increased cost burden from higher jet fuel prices to consumers by raising ticket prices.

Meanwhile, on this day, United Airlines announced that its merger attempt had fallen through. Scott Kirby, CEO of United Airlines, said, "There were difficulties in the acquisition process, as American Airlines showed a passive attitude in the negotiations," and added, "Negotiations with American Airlines have ended."

Previously, Bloomberg News reported that United Airlines proposed a merger with its competitor American Airlines to the Trump Administration in February. Following the report, American Airlines made it clear that it had no intention of merging.

Currently, the U.S. airline market is dominated by four major carriers: Delta Air Lines, United Airlines, American Airlines, and Southwest Airlines. The WSJ reported that attempts by major airlines to merge would be difficult to gain regulatory approval due to monopoly concerns, and would be impossible without large-scale asset sales.

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