JetBlue, Spirit rejected by DOT on nearly all bailout waiver requests

U.S. regulators denied JetBlue Airways and Spirit Airlines requests to suspend service to dozens of cities across the country as they face near-zero demand amid the novel coronavirus pandemic.

In both decisions released Thursday, the Department of Transportation cited a need to maintain "necessary" airline connectivity to all communities across the U.S. as spelled out under the government's $2 trillion bailout package known as the CARES Act. Airlines were able to apply for waivers to suspend service to certain destinations. But neither JetBlue nor Spirit "persuaded" the agency that the majority of their waiver requests — 12 airports for JetBlue and 26 for Spirit — were necessary reductions, the regulator said.

The DOT only granted service suspensions for two airports: Aguadilla (BQN) and Ponce (PSE) in Puerto Rico. Both have been closed by the Federal Aviation Administration and governor of Puerto Rico.

JetBlue sought waivers for both Puerto Rican airports, while Spirit for only Aguadilla.

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The air service requirements are part of the $50 billion set aside for the airline industry in the CARES Act. In exchange for taking some of the $25 billion in payroll assistance, airlines must maintain service to all of the U.S. destinations in either their winter or summer schedule. They can also reduce the number of flights they operate to as little as one a week.

These requirements come up against a stark lack of demand for air travel. The Transportation Security Administration (TSA) screened just 90,784 people, or less than 4% of the number it screened a year ago, at airports across the country on April 15. The numbers include both travelers and crews.

While there is essential travel that continues, an airline like Spirit caters primarily to leisure passengers — a segment of the market that has all but disappeared.

Related: Airlines ask DOT to suspend flights to more US airports, small cities fare worst

At least 10 airlines, including JetBlue, have accepted the compensation aid forcing them to either continue flights or seek waivers. An analysis of the first 126 waivers sought found that 61% affected small airports across the country, or ones that see less than roughly a million annual passengers.

Spirit has yet to officially accept the payroll assistance assistance.

The DOT's decision on JetBlue and Spirit's waivers suggests that it will take a hard line on other airlines' applications. Barring what it deems a persuasive argument, it seems fair to expect most waivers will be denied. Other requests that may be approved are for airports like Cedar City (CDC), Utah. That airport is closed for runway work through July. Another possibility: Saipan (SPN), where the local government has asked United Airlines to temporarily suspend flights.

Airlines are already finding creative ways to continuing service to cities across the country. Alaska Airlines will consolidate 12 routes from its Seattle (SEA) hub where six cities are served via a stop in six other cities. American Airlines will suspend routes to many of its hubs and focus on maintaining service to primarily just its Charlotte (CLT) and Dallas/Fort Worth (DFW) hubs across its network.

Related: U.S. airlines are flying more with smaller jets with demand near zero

In addition, carriers are flying more of their schedule with small jets in their fleet. For example in May, American will operate more of its schedule with 128-seat Airbus A319s and less with larger Airbus A321s and A321neos that seat up to 196 passengers.

Airlines can also still suspend service to airports in large metropolitan areas served by multiple airfields, like Los Angeles and New York. JetBlue plans to consolidate service in five regions: Boston, Los Angeles, New York, San Francisco and Washington.

Spirit spokesperson Field Sutton told TPG that the airline was "thankful for the expeditious review" of its waiver application, and appreciated the Aguadilla exemption.

JetBlue was not immediately available for comment.

Updated with comment from Spirit Airlines.