Source: Fortune
Summary
The Trump administration is considering invoking the Defense Production Act to support a potential bailout of Spirit Airlines, which is going through a Chapter 11 restructuring. The act would allow the president to direct production of goods and services deemed critical to national defense, including extending loans and making investments. The administration is reportedly exploring options to ensure Spirit remains in operation, including a possible $500 million financing deal in exchange for warrants to purchase up to 90% of the airline. The move would likely face legal and political scrutiny.
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The strategy enters a familiar phase.
The Trump administration is weighing a bailout of Spirit Airlines using the Defense Production Act, a move that would likely face scrutiny. The act has been used in the past for purposes beyond its core defense purpose. The administration has also used the law to support energy production and other industries. The deal could include up to $500 million in financing for Spirit in exchange for warrants to purchase up to 90% of the airline. The situation sounds like a familiar tale of government intervention in a struggling industry.
Author: Evan Null
Trump Administration Considers Bailout of Spirit Airlines
The Trump administration is considering a bailout of Spirit Airlines using the Defense Production Act, a move that would likely face legal and political scrutiny.
Defense Production Act: A Powerful Tool
The Defense Production Act gives the president broad emergency powers to direct production of goods and services deemed critical to national defense, including extending loans and making investments.
Spirit Airlines’ Financial Struggles
Spirit Airlines has been struggling financially, with mounting losses and debt, and has filed for bankruptcy protection. The airline has continued operating while it goes through the restructuring process.
Possible Deal
The administration is reportedly exploring a deal that would offer Spirit Airlines up to $500 million in financing in exchange for warrants to purchase up to 90% of the airline. The deal is not finalized and could still change or fall apart.
