A group of budget airlines is reportedly seeking financial assistance from the federal government that could convert to an equity stake in the air carriers.

The group of budget airlines, including Frontier and Avelo, is seeking $2.5 billion in federal assistance through stock warrants that could convert into equity stakes in the airlines, the Association of Value Airlines said in a statement. The group represents Spirit Airlines, Frontier Airlines, Allegiant Air, Sun Country and Avelo.

The Wall Street Journal first reported the news.

The market dominance of the country’s biggest airlines has never been greater, and smaller value airlines are disproportionately impacted by higher fuel prices. Value airlines play a critical role in the affordability and accessibility of air travel," the group said.

"Value airlines also keep fares competitive across the industry, with an average base fare of $111, which is over two times more affordable than a ticket on one of the high-fare airlines," it added.

Some of the Journal's sources told the outlet that the group's $2.5 billion figure was derived from an estimate of how much the airlines expect to spend on jet fuel this year compared with earlier forecasts, with the estimate assuming jet fuel prices will remain above an average of $4 a gallon for the rest of the year.

A Frontier Airlines plane approaches Ronald Reagan Washington National Airport. (Ken Cedeno/Reuters)

Conversations about a possible relief package for budget airlines are reportedly expected to continue in the coming days, according to the Journal's report. The news follows a reported meeting between the leaders of several budget carriers with Transportation Secretary Sean Duffy and Federal Aviation Administration chief Bryan Bedford last week.

"As the smallest and newest airline in the country, Avelo competes against significantly larger airlines who have unprecedented market dominance," Avelo Airlines said in a statement to FOX Business. "Our focus on unserved and underserved airports gives millions of U.S. consumers low fare nonstop air service options they otherwise would not have. We have no specific comment on the report, but we emphatically agree that a healthy airline industry with strong competition is important to the U.S. economy, especially during this period of high fuel prices."

Frontier Airlines referred FOX Business to the statement posted by the Association of Value Airlines.

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Rising jet fuel prices amid the war in Iran have strained the outlooks for air carriers, who face higher costs than anticipated. 

Some air carriers, including larger rivals like United and American, have responded by raising fares and checked baggage fees on consumers.

United Airlines recently raised passenger fares, citing the rising cost of jet fuel. (Tayfun Coskun/Anadolu Agency via Getty Images)

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Last week, leading budget carriers requested that Congress pass a bill to suspend the 7.5% federal excise tax on airline tickets and the $5.30 per segment tax, which the Association of Value Airlines estimated would offset about one-third of the increased fuel costs. 

The budget airlines' pursuit of federal aid comes as the Trump administration is weighing a separate proposal to provide relief for Spirit Airlines in the form of a $500 million loan that would give the federal government the ability to convert warrants into equity stakes in the airlines.

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The deal would see the federal government receive warrants equal to about 90% of Spirit's equity in exchange for the funding.

The Trump administration is weighing a separate proposal to provide relief for Spirit Airlines. (AaronP/Bauer-Griffin/GC Images)

Rising jet fuel costs have complicated Spirit's plan to exit bankruptcy this summer, after the budget carrier entered Chapter 11 bankruptcy proceedings for the second time last year.

During the COVID-19 pandemic, the Treasury Department received warrants in major airlines after a roughly $54 billion support package to prevent mass layoffs during the pandemic. 

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The federal government ultimately opted against exercising the warrants it acquired and instead sold them in actions that yielded over $550 million.