Spirit Airlines could get $500M bailout as talks intensify
The Trump administration is said to be considering a financing package for Spirit Airlines that could include an equity stake.
Spirit Airlines could get a $500 million bailout from Washington.
The Trump administration is in talks about rescuing low-cost carrier Spirit Airlines, which is struggling to exit bankruptcy, according to reports from various outlets.
The loan would give the government warrants to take a potential stake in the carrier, The Wall Street Journal reported.
Sources familiar with the matter told Reuters, The New York Times and the Journal that Spirit and the federal government are in advanced discussions about the terms of a financing package and hope to finalize it imminently.
Spirit Airlines declined to comment about the discussions, but said there is no impact to flights at the moment.
"We are operating our business as normal; Guests can continue to book, travel and use tickets, credits and loyalty points as usual," Spirit said.
White House Press Secretary Karoline Leavitt was asked why Trump wants the administration to invest in a bankrupt airline. She said the Commerce Department and the president are tracking the issue.
"I understand the airline is bankrupt because the previous administration blocked the merger, which was probably not a wise move," Leavitt told reporters at the White House. "The aviation industry is very important to this president and this White House. Millions of Americans depend on it. We want to see the best possible outcome but I don’t have any announcements to make."
President Donald Trump told CNBC on Tuesday, April 21 that he would like someone to acquire Spirit and said it was possible that the federal government could get involved, the latest example of the Trump administration's intervention in public companies.
Why is Spirit in a bad position?
Spirit Airlines has gone through multiple bankruptcies but has been unable to fix its balance sheets.
"Spirit, for all the talk about how small the (ultra low cost carriers) are individually, it’s a pretty big route map," William J. McGee, senior fellow for aviation and travel at the American Economic Liberties Project, told USA TODAY.
Is Spirit the only airline struggling?
Global carriers are contending with surging jet fuel prices after U.S.-Israeli strikes on Iran disrupted traffic through the Strait of Hormuz. United Airlines CEO Scott Kirby said April 22 that ticket prices may need to rise by as much as 15% to 20% to offset a surge in jet fuel costs. Delta Air Lines, similarly, announced a slimmer summer schedule for the same reasons.
Spirit, for its part, said it plans to shrink its fleet to about one-third of its pre-bankruptcy size, retaining roughly 76 to 80 aircraft by the third quarter of 2026.
The carrier built its turnaround plan based on fuel costs averaging about $2.24 per gallon in 2026 and $2.14 per gallon in 2027, according to its March disclosures. By mid-April, jet fuel prices were around $4.24 a gallon, roughly double the level assumed in its projections.
Will other airlines be next?
Spirit, best known for its bright yellow all-Airbus fleet, built its brand around affordable fares for budget-conscious travelers ready to eschew add-ons such as checked bags and seat assignments.
U.S. Transportation Secretary Sean Duffy on April 21 raised concerns about using government funds to rescue the carrier. "What we don't want to do is put good money after bad, and there's been a lot of money thrown at Spirit, and they haven't found their way into profitability. And so would we just forestall the inevitable and then own that?" Duffy said in a Reuters interview. "Or does Spirit have some pathway to make it, and I don't know the answer to that."
Duffy said it appears no one wants to buy Spirit. "What would someone buy?" Duffy asked. "If no one else wants to buy them, why would we buy them?"
Duffy told Reuters the high jet fuel prices were prompting talks among airlines. "If you do do Spirit, who comes next? Who is the third?" Duffy added, "If Spirit goes away, it's better for JetBlue. If we bail out Spirit, I can't imagine that JetBlue would love that."
This story has been updated to add new information.
Contributing: Bart Jansen, USA TODAY; Reuters