Budget airlines seek tax relief for jet fuel costs caused by the war

Low-cost airlines were in D.C. Tuesday to meet with Transportation Secretary Sean Duffy and ask for help with jet fuel prices, which have spiked because of the war in Iran.

The Association of ​Value Airlines, which represents Spirit, Allegiant, Sun Country, Frontier, and Avelo, sent a letter to Congress last week asking for temporary tax relief. Now, they’re following up in person.

In the weeks after the U.S. and Israel attacked Iran, jet fuel prices almost doubled from about $2.50 a gallon to nearly $5. They’ve come down a little in the last couple of weeks, but remain high.

“This is, like, genuinely a big deal,” said David Slotnick, contributing aviation editor at The Points Guy. He said it’s an especially big deal for low-cost carriers. “These airlines typically are lower margin, they have a lot less wiggle room and fewer levers to pull when their costs go up."

Bigger airlines can more easily raise ticket prices to offset some of these higher jet fuel costs, in a way budget airlines can’t, said Dan Akins, a partner at consulting firm Flightpath Economics.

“Simply because their passenger base is much more price-sensitive,” he said.

That’s why this group of low-cost airlines is asking the government for help in the form of tax relief.

But Akins said the ask raises a fundamental question: “If airlines are going to get relief, especially a category of airlines, why aren't all airlines getting relief?”

And if airlines get relief, why not other industries?

“Trucking companies, taxi companies, Uber, they're all facing enormous increases in cost as well,” Akins said. “So is there a call to subsidize all industries that are fuel-sensitive?” What about subsidizing consumers?

At the same time, Slotnick at the Points Guy said this is an existential threat for low-cost airlines.

“The argument they're trying to make to the government is that the price of fuel is on its way to putting them out of business. Them continuing to exist is good for the American consumer and in the government's best interest,” he said. And it’s the Trump administration’s war in Iran that has put them in this position.