Shadowing Practice: Spirit Airlines GOES BUST After Jet Fuel $$ Doubles - Learn English Speaking with YouTube
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Let's turn now to Spirit Airlines in terms of the impact.
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Let's turn now to Spirit Airlines in terms of the impact.
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So a lot of different claims going around are out there about why Spirit Airlines not only went bankrupt, but went literally ceasing operations overnight,
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leading to some passengers having to be rebooked, emotional, you know, under goodbye announcements from pilots in the middle of the air.
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You almost never see this in the United States.
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Usually airlines are going to bankruptcy.
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That's not even all that uncommon, but to find a potential buyer, you know, they were potentially going to get a bailout from the government.
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None of that ended up happening, and they just genuinely went bust overnight with, yes, some signs in the immediate future, but not really many people expected this.
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So the Trump administration obviously reacting to this over the weekend.
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Here was Secretary Scott Besson saying, actually, it's Biden's fault.
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Let's take a listen.
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The Treasury was supposed to be doing a deal to save this company.
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Can you tell us what happened?
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Sure, Maria.
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So this is just more of the mess we inherited from the Biden administration.
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In September 2022, Elizabeth Warren, who loves to write letters, sent a letter to the Justice Department, to the Transport Department, saying that they should oppose the merger with Spirit Airlines.
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JetBlue wanted to buy them for $3.8 billion.
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It would have given them much more resiliency.
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And she and the transportation secretary Pete Buttigieg is probably the worst transportation secretary in history when he came to the office.
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They also they were against the merger.
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And if JetBlue had merged with spirit, we would have all these jobs that were lost yesterday.
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We had 30 airport 30 regional airports who have lost service.
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And I can tell you what happened here.
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It wasn't Treasury.
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It was Commerce that was trying to put something together.
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But the reason we were here was because the merger, the Biden administration opposed the merger.
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We shouldn't have been here in the first place.
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So a lot of this is going around in terms of the blame.
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And I'm actually going to go jump to the last element, guys, here in the Block B7 from our friend Matt Stoller, who wrote this piece, Who Killed Spirit Airlines?
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He says it wasn't Biden's antitrust enforcers.
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There were many factors.
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Trump's Iran war, JetBlue, the big four airlines, and behind all of that, deregulation.
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This story has happened hundreds of times.
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I actually think what he points out, and obviously this is mostly about the Iran war.
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I think that's it more than anything.
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But just to address this immediately.
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That's certainly the final trigger that killed them.
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Right.
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The Iran war is what actually put the bullet in their head.
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But obviously they were dying, bleeding out for many years.
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What happened?
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They had a proposed merger with JetBlue.
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And on paper, you're like, okay, well, that seems better.
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What I wasn't really aware, though, from that until I really dug into it was JetBlue's plan was to hike fares and to cancel like 40 percent or something of their route.
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So not really good for the consumer.
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Now, maybe it'd be better off if they had merged and, you know, it was still moderately there.
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But however, what I seem to have read now is that many of the airlines were actually lobbying the Biden or the Trump administration not to bail out Spirit Airlines.
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Why?
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because Spirit, at the end of the day, listen, I hate Spirit Airlines and I wouldn't fly it, but I fly more than once a year.
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The vast majority of their customers are one to three times a year flyers who are looking for a cheap discount fare to go place from A to B, and they don't care if they're not gonna get a soda from Washington to Denver for a four and a half hour flight.
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That's not really a priority.
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Or have to pay to pick your seat or whatever.
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Pay to pick your seat.
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They're like, I don't give a shit, just get me from point A to point B so I can go see my cousin or can go on vacation.
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It's fine.
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I think that's a very valuable place in the market.
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So what they happened to do is that Spirit's competitive fares actually dragged down basic economy fares for all of the big three carriers.
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So the big three carriers were desperate, actually, for the government not to bail out Spirit so they could go bust.
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This is another reason why JetBlue really wanted to acquire Spirit and hike the rates was because they're competing against each other.
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So this is actually a good example of multifactorial policy.
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Number one is that we had a policy where we had a discount airline, which we potentially would have bailed out.
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I think we should have bailed them out.
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And look, I know many people are going to be upset about that, but I think cheaper airfare is a vital and important thing to a functioning first world nation.
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I just really do.
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That's why they have Ryanair and all those cheap options in Europe.
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And honestly, it's really nice for a lot of the people who live there.
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You can jet literally across the continent.
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Here, we've never had that.
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We're a huge country.
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I accept that.
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But a couple hundred dollars as opposed to $600, $700 is really, really important to especially middle-class people or families trying to get somewhere.
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So you have this general policy where we potentially would have done a bailout.
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We ultimately didn't do it for a variety of reasons.
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I mostly think it's because the big three airlines said, hey, please don't do it.
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And then the Iran war doubled their jet fuel cost overnight and basically just put two bullets in their head and they just had to die.
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It's honestly a tragic story.
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It's a direct consequence of Iran, but of a lot of other government policy over the years.
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Yeah.
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And to your point, so the big airlines really despise them and have been trying to do everything they can to destroy them.
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And Matt has some reporting that's not totally confirmed, but that he had from an insider about the way they would do that.
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And so effectively, he said, consumers of low fare airlines tend to book a few weeks before their trip.
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So a few weeks before a Spirit flight from, say, New York to Orlando, one or more of the big carriers would radically discount their price on just 20 seats on a similar route.
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So they would poach those last 20 customers from Spirit.
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Now, they could afford to effectively sell those seats at a loss.
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And what that means is for spirit, it would take what would have otherwise been a profitable flight and put it in the red.
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And so there is a if you look at their profitability over time, somewhere around 2016, it seems like the big carriers figure out this strategy to effectively try to come in and destroy them.
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And so then now you had them on weak financial footing, looking for a bailout, really being pushed over the cliff by the Iran war and the jet fuel prices.
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And then who's there to come in and do that final shove over the cliff?
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The major carriers who want them to be dead.
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You know, in terms of this jet merger, potential merger, because this is what all the talking points are about.
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Oh, Biden's antitrust and even narrative.
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And it's not just the Republicans, by the way, Neera Tanden and other corporate type Democrats coming in using the same argument to argue against future antitrust enforcement were you to have another Democratic administration.
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The other problem with it, number one, it was sort of on its face illegal.
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Even Spirit Airlines created a presentation for their shareholders where they're like, this is probably illegal and will probably be blocked.
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They were contemplating a separate deal where they would merge with another low-cost carrier frontier,
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which seemed to make more sense and would have preserved their business model and preserved the downward pressure that they had on prices and the positive impact they have for consumers on the routes that they fly.
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But the shareholders ignored that advice, went ahead with it, hoped for the best.
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ultimately, predictably, it was struck down as illegal.
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There's one other aspect of it too, though, which is that JetBlue was really loaded up with debt at that time as well.
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And so they would have been taking on, obviously, an even more extraordinary amount of debt just to buy Spirit.
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So it's not even clear that JetBlue would have been able to manage then their debt service, and they would have survived into the future.
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But it certainly would have meant that, you know, Spirit would have been killed earlier, would have been killed at the time of that merger versus being killed now by the jet fuel price surge and by the four big carriers who wanted to see them gone.
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Let's put B4 up here on the screen because it's one thing to say jet fuel.
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It's another here to see the numbers.
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So Patrick DeHaan over at GasBuddy compiled this list.
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Just check this out.
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This is from May 2nd, so only two days ago.
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Just imagine what airlines are contending with.
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Here is the cost to fill a Boeing 777 today.
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Chicago, $213,000.
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Dallas, $180,000.
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Minneapolis, $180,000.
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New York City, $180,000.
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Los Angeles, $217,000.
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Seattle, $225,000.
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So yeah, that's a lot of money.
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We're talking about 200 grand in some cases to fill up the whole plane.
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Now, look, I get it.
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It's a big aircraft.
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Like, you know, he probably picked a bigger one just to show exactly what you're dealing with at a macro level.
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And I know it does take a full tank of gas to get somewhere.
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But I mean, come on, two hundred thousand dollars just to fill up an airplane like that.
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That's a lot of money.
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And that's double literally what it costs as of a month ago.
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So that's going to show up somewhere.
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There is no denying this.
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The Iran war is what killed spirit.
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Now, they were again, they were bleeding out already, but it was the jet fuel crisis.
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Let's go ahead and put B3 up there on the screen.
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They actually detail this in Al Jazeera.
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They've begun their wind down all over the jet fuel doubling in prices that will cost now thousands of jobs.
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But I think more importantly is that this airline, so for example,
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in the week between May 1st and May 15th, they had 809,000 seats, which would have flown on 4,119 domestic flights.
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So that is almost 800,000 or sorry, 400,000 seats because of the status of when they're going bankrupt that will just not be here this week.
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400,000 seats on an airplane.
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That is going to show up somewhere.
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And the likelihood is it will show up in now American and Delta and United.
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They can charge whatever they want.
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And they've got the jet fuel stuff on top of that.
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So good luck to anybody who wants to fly right now.
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I don't think it's out of the question to see $800,000 fares even for intra-east coast, like in the middle of the summer.
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And in terms of international, good luck.
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Like I was looking at Dubai this morning.
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Even in the couple of weeks since the ceasefire, air traffic out of Dubai, or passenger traffic in Dubai International Airport is down 20%.
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Now, look, some of that demand will be destroyed, let's say 10%.
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But those other 10, if they're still going to fly somewhere, they might have to go through Europe.
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So if you're going to Asia and you're connecting through Europe or a direct flight, one of those very competitive flights from here in the US, I think it will be thousands of dollars.
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I think the idea of an economy ticket being 1,000 to 2,000, which I still think was high compared to where things were before,
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I think you could potentially start to see real economy seats, not premium economy seats, be like 3,500, $4,000 in the middle of peak summer if stuff like this continues.
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And you have airlines adding on additional jet fuel surcharges like Japan Airlines, $350 per ticket for any one-way flight, North America and Europe.
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And then so round trip, that's another $700.
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Heathrow, I'm sure by the end of the next few months, they already have a very, very high landing tax.
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I think it could go up even more, several hundred bucks.
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So this is just going to be unsustainable.
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You're just not going to be able to fly anymore at a certain point.
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And looking internationally, Air India, they cut all of their international flights through July.
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All of them.
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Oh my God.
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Yeah.
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They cut all of their- This is a very specific niche thing, but there are a lot of families living in the Bay Area and people like me who grew up as first generation immigrants who all would go to India over the summer and book on shitty air- no offense.
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Actually, no offense.
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On shitty airlines like Air India.
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Air India is the worst airline I've ever flown on.
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Okay, fine.
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Let's just say it.
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It's dog shit.
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All right.
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It's literally cockroaches.
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I'm not getting the worst airline in the world.
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Sorry, don't sue me.
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All right.
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It's I had a bad experience.
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It's my own personal.
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Multiple bad experiences.
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Yes.
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But anyway, it's not good.
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They're cutting all of their international.
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So apparently they're flying domestically still within India, but all of their international flights through July are completely cut.
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But, you know, going back to what you're talking about, in terms of the impact here domestically from Spirit's closure, there was literally something called the Spirit effect.
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When they would begin flying a certain route, every other carrier knew they had to reduce their price.
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And so with them gone, now their hand is freed.
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And Stoller makes a bigger point, and really should read his whole analysis because it's typically, as usual,
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it's very excellent and in-depth and very thoughtful, which is that ever since the airline industry was deregulated,
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you've had all of this combination of consolidations and mergers, and then just so many bankruptcies, because it really is the type of service,
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and it compares it to the mail service, where it's like you pay the same amount for a stamp, and for some places, that is you're sort paying above cost and you're subsidizing service to rural areas.
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It's a similar dynamic with air travel, where if you want there to be reliable, affordable access throughout the country,
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you're going to have to manage that from the federal level and make sure that those routes, even the ones that are not the most profitable, that those continue to be serviced.
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And so, you know, undergirding this whole story, you know, going back now decades when the decision was made to deregulate airlines,
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that's when you get to this scenario of having, you know, a handful of choices and the big airlines with their hubs and the way they're able to operate and the way they're able to go after new entrants like Spirit that were trying to undercut them on price.
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that's how you end up in this situation where, you know, it's air travel is miserable, where you don't have access in certain parts of the country, where low cost carriers and others who are trying to innovate are quickly pushed out.
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Last thing here, we can put B5 up on the screen.
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It just shows you that this fuel price crunch is not just going to affect airlines here.
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We already talked about Air India, Sagar was talking about Ryanair.
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Actually, the UK is now loosening some of their rules and saying basically like, okay, if you have a flight that's going somewhere that's half empty and you have another one later in the day, you're allowed to push those passengers to that other flight, which is something they weren't allowed to do before.
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But in any case, you know, this is the early days.
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This is the early days of the impact from the war.
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This is just like COVID, where, you know, you drop a giant boulder in the water and then the ripples just spread and spread and spread.
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And this is one of the first very noticeable ripples.
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And, you know, is it the end of the world?
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No.
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If you were hoping to go to a wedding or a funeral or visit your relatives or, God forbid, go on vacation, certainly not a happy thing, but it's not necessarily life-threatening.
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But this is just the first of many, many impacts that we are already seeing ripple throughout our economy and the global economy.
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Yeah, exactly.
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Look, what made COVID inflation miserable is nobody died because food prices went up by 20% or, okay.
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Very few people probably did.
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Very few people died because food prices went up by 20%.
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It still sucked.
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I mean, that's the, that's the whole part.
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What has been happening in this country since 2020 every year, it gets worse housing, food, things been more expensive.
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It's just like, everything has more friction.
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Has it really gotten better?
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I, I just, I don't, more crime.
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It's just like, everything is shitty.
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And, you know, there's that.
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What is the theory?
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It's like and shitification.
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I'm sure you've heard that before with corporate corporate, you know, dealing with a corporation, health insurance.
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Right.
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It's just nothing is simple.
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And yes, maybe that is romanticizing a different time.
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But I don't know.
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I just I just feel like things are getting worse and worse and worse.
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And I don't see anything particularly getting better.
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Speaking of that, let's go to Israel.
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Context & Background
The discussion in the video revolves around the rapid bankruptcy of Spirit Airlines, a remarkably rare event in the history of U.S. airlines. Views are exchanged on various factors leading to this situation, including political decisions, regulatory dilemmas, and market conditions. The speaker explores the background of Spirit's financial struggles, emphasizing how external influences, such as potential mergers and governmental opposition, contributed to the airline's downfall. This context provides a vital framework for understanding the complexities of the aviation industry and the importance of effective communication during crises.
Top 5 Phrases for Daily Communication
- "Let's turn now to..." - A phrase used to transition into a new topic.
- "Can you tell us what happened?" - A way to request information or clarification.
- "This was just more of the mess we inherited..." - A phrase to express the ongoing nature of issues.
- "At the end of the day..." - A common expression indicating the main point or conclusion.
- "It's probably the worst..." - An idiomatic way to emphasize a negative opinion.
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