Spirit Airlines Is Broke. America Should Buy It.
I am once again asking for a sensible solution to our failed air travel system.
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Compared to our European counterparts, American air travel is a uniquely terrible experience. Cramped seats. High fares. Stale pretzels. Unless you can afford the luxuries of business class, nearly every American enters the airport accepting that the next twelve hours will be miserable. Flying will never be a day at the beach. But it doesn’t have to be this bad. There’s nothing unique about American geography that would make our air travel experience so much worse than that of our peer nations. That is a product of runaway market consolidation and profiteering. Those are uniquely American problems, caused by the free-market zealotry that drives our political class to choose ideological purity over improving the lives of their constituents.
Last week, Donald Trump announced the American government would support Spirit Airlines through its latest financial troubles. Bankrupt for the second time in twenty months, Spirit blamed its latest crisis on rising fuel costs driven by the Iran War. But analysts have cast doubt on that claim, pointing out that Spirit has been in jeopardy well before the joint Israeli-American intervention in Persia.
In typical Trumpian fashion, the more the President said, the less we knew. When asked by a reporter if the government plans to buy Spirit, Trump blamed the airline’s woes on Barack Obama for blocking a merger between People Express Airlines (which closed in 1987) and Spirit (which was incorporated in 1990). The President was equally confused about Spirit’s future as he was about its past.
“We’re thinking about doing it, helping them out, meaning bailing them out, or buying it. I think we’d just buy it… then sell it for a profit when the price of oil goes down.”
Conservatives grumbled at the prospect of a state-owned airline, but their distaste was unnecessary. Trump’s plan to profit from Spirit is far closer to a libertarian view of government than a socialist one. As Spirit’s lawyers told the bankruptcy court, they are in “very advanced discussions” with the government to “create an appropriately capitalized, fierce competitor in the airline space.” In normal person speak, that means Spirit plans to remain a for-profit company.
It’s a shame the United States government isn’t interested in buying Spirit Airlines and running it as a public option. Because that’s exactly what America needs.
Market Failure To Launch
I’ve previously written about how airline market consolidation has led to a worse flying experience and to an industry-wide monopoly. Basically, airlines meet once a year at the International Air Transport Association meeting and conspire to keep ticket prices “disciplined” — an agreement to charge you high prices so profits aren’t undercut by one airline trying to out-compete the others. It’s an open violation of every anti-monopoly law on the books, but no one seems to care.
The air travel industry can do this because its market is uniquely consolidated. The Big Four Airlines of American, Delta, United, and Southwest account for 80% of all domestic air travel, while smaller carriers such as Spirit, Frontier, and JetBlue squabble over the remaining 20%. The Big Four are big for a reason. Over the last half-century, 46 airlines have merged into these four companies. It’s much easier to fix prices with four competitors than forty, which is why airlines can charge you more and more for smaller and smaller seats. You simply don’t have anywhere else to go.
The harms of runaway airline consolidation extend far beyond the passenger experience. Spirit Airlines is a single company and only a minor player in the market. But its bankruptcy speaks to a much larger problem, one that raises questions about the for-profit model of privatized air travel, and by extension, the entire capitalist economy.
