Spirit Airlines Prepares to Shut Down
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What led to Spirit Airlines preparing to shut down?
Spirit Airlines prepares to shut down after a rescue deal falls apart. Plus, President Trump threatens to raise tariffs on autos from the European Union. And a new law in Illinois banning some credit card fees has banks up in arms.
This opens up the possibility of other state legislation that could more significantly impede their ability to collect fees.
It's Friday, May 1st. I'm Alex Oseleff for The Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today. First up, Spirit Airlines is preparing to end operations.
What were the details of Spirit's failed bailout plan?
After spending much of the past year and a half in Chapter 11, Spirit had been hoping to finalize a $500 million lifeline from the government before running out of cash. The journal has learned that that bailout has fizzled. Now the airline is preparing to shut down. I'm joined now by WSJ reporter Allison Sider. Allison, what happened to the bailout plan?
What is the new Illinois law regarding credit card fees?
The rescue that Spirit and the government and its bondholders have been talking about for the last... couple of weeks, some of its bondholders dug in their heels against the deal, convinced that it was not going to be the best outcome for them. There was disagreement within the Trump administration. Our understanding is that those talks are over and as a result, Spirit is going to shut down.
We should note that Trump told reporters at the White House today that though he'd like to have the chance to save Spirit's jobs, he would only agree to a deal with the company if it was, quote, a good deal. Now we're reporting that Spirit is expected to end its operations Saturday in the early morning hours around 3 a.m. Eastern. How do you expect the airline industry to respond?
Some of Spirit's competitors have been almost hoping that this would happen. It removes a lot of capacity from the markets, means less competition. What was Spirit's reputation in the industry? Spirit is sort of a shadow of its former self. It used to be much more of an industry maverick that really went head to head with bigger airlines and helped keep fares in check. And in ways that consumers didn't like so much either, it's helped bring over the nickel and diming fee model to the United States where Spirit charged super low base fares and then charged a fee for almost everything else, even water or paper boarding passes. But in the years since, lots of airlines have adopted many of those practices.
It's the end of the line for an airline that was really revolutionary in its time and helped bring cheap air travel to the masses.
That was Journal reporter Allison Sider. Thanks, Allison. Thanks so much for having me. President Trump said today that the U.S. will raise tariffs on cars and trucks from the European Union to 25 percent from 15 percent. The president says the EU isn't complying with the trade agreement it signed last year. European lawmakers are in the process of passing legislation for its side of the deal. The European Commission said the bloc is putting the deal into practice and that it will, quote, keep our options open to protect EU interests if the U.S. doesn't abide by the agreement. The White House didn't say when higher tariffs would go into effect. As you probably know, banks get money from stores whenever customers use their credit card.
An Illinois law set to go into effect this summer would ban a small part of those credit card fees. The fees wouldn't be applied to taxes and tips. Stores argue that right now it's unfair that they have to pay credit card fees on money that doesn't end up in their pockets. Now, this law may sound like small change in the scheme of things, but it could have big repercussions. Ben Glickman covers payments for the journal and joins us now. Ben, credit card fees have long been a point of tension between merchants and banks and credit card companies. Some recent developments have been in favor of merchants, like a settlement that lets them reject some credit cards. What do stores hope to gain from the Illinois law if it does go into effect?
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