Who would want to own an airline?

At Tricio we like to look at charts in order to gauge market sentiment and investor action. Back in September 2025 we wrote a blog about the US government taking a stake in Intel. The dream scenario for bulls of seeing $69 again was met last week.

With that success under his belt, US President Trump may well be set to approve (or push for) a US government bailout of Spirit Airlines (holding company share price chart, semi-log weekly, below) with most reports agreeing on a $500 mio cash infusion for up to 90% of the airline.

Given the long held view by seasoned investor Warren Buffet that airline shares are a ‘death trap’ (in his own letters to shareholders with the 2007 airline paragraph below), any government money put into this idea may be seen as risking ‘return of capital’, not ‘return on capital’.

“Now let’s move to the gruesome. The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines. Here a durable competitive advantage has proven elusive ever since the days of the Wright Brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down. The airline industry’s demand for capital ever since that first flight has been insatiable. Investors have poured money into a bottomless pit, attracted by growth when they should have been repelled by it. And I, to my shame, participated in this foolishness when I had Berkshire buy U.S. Air preferred stock in 1989. As the ink was drying on our check, the company went into a tailspin, and before long our preferred dividend was no longer being paid. But we then got very lucky. In one of the recurrent, but always misguided, bursts of optimism for airlines, we were actually able to sell our shares in 1998 for a hefty gain. In the decade following our sale, the company went bankrupt. Twice. To sum up, think of three types of “savings accounts.” The great one pays an extraordinarily high interest rate that will rise as the years pass. The good one pays an attractive rate of interest that will be earned also on deposits that are added. Finally, the gruesome account both pays an inadequate interest rate and requires you to keep adding money at those disappointing returns.”

Buffet, of course, reversed his view on airlines in 2016, only to jump out again as Covid hit in 2020.

Why would Trump want to bailout a low-cost carrier that has a share of just above 3% in the market? Consider the points below:

• Trump has been tempted by airline ownership in the past

• Trump has the view that he knows how to run a company (country, wars etc.) better than any ‘experts’. No doubt under his guidance Spirit Airlines would succeed again, in his mind. There may be the added bonus of involving the Trump name in any bailout as well of course…Trump Spirit? Spirit of Trump? Hmm….

• There is a case to be made that low-cost airlines benefit regional airports and lower fares overall for travellers where they compete. Spirit has a reasonably large presence in some Florida airports. This also matters to the President as the rise in the cost-of-living is a negative narrative ahead of the mid-terms.

• Spirit could benefit from government ownership if the government does take a stake. Think of all the military and other federal government employees travelling in the US, and abroad on airlines and what a boost to Spirit it would be if they had a preferential booking system for US federal employees? Any politician, lobbyist or foreign person trying to cosy up to the US government would start any meeting with a story of their great flight on Spirit Airlines to get to DC.....

• Finally, given that the Biden administration scuppered the last potential merger of Spirit Airlines, Trump may relish ‘rescuing’ the firm and jobs from Biden’s ‘mistake’, with all of the usual jibes at the former President.

  
  

For investors? The government taking such a potentially large stake could be seen as a lifeline, but may not benefit existing shareholders or bondholders who have been wiped out a few times as the firm went in and out (and in again) into administration. Still, if the government takes a 90% stake, look for retail interest to build on the view that a nationalised airline could fly for a while. Just don’t forget to manage the downside risk.

Gerry Celaya

Chief Strategist