SPIRIT AIRLINES SHUTS DOWN
Administration official says he doesn't think carriers need bailout
A Spirit Airline plane sits on the tarmac Saturday at LaGuardia Airport in Queens, New York City.
An employee places a Spirit Airlines operational update notice Saturday at Orlando International Airport in Florida after the airline announced it would cease operations.
ECONOMY
WASHINGTON — Bankrupt discount carrier Spirit Airlines ceased operations Saturday, the industry's first casualty linked to the Iran war, after failing to secure creditor support for a U.S. government bailout plan.
The carrier's collapse after jet fuel prices doubled during the 2-month-old Iran war will cost thousands of jobs.
It's a blow to President Donald Trump, who proposed $500 million to save Spirit despite opposition from some of his closest advisers and many Republicans in Congress.
No U.S. carrier of Spirit's size — it accounted for 5% of U.S. flights at one point — had liquidated in two decades. Spirit helped keep fares lower in markets where it competed against major carriers.
U.S. Transportation Secretary Sean Duffy said he does not think the government needs to bail out low-cost airlines that sought $2.5 billion in government relief because of high jet fuel prices.
"They do have access to cash. If they want to come to the U.S. government, we would be a lender of last resort. If they can find dollars in the private markets — I think that's better for them," he said at a news conference at Newark airport after Spirit's collapse.
He said some other airlines saw the prospect of a Spirit bailout as an opportunity to get money "not necessarily based on need, but based on opportunity."
On Monday, a group of U.S. budget airlines, including Frontier and Avelo, said it proposed exchanging warrants that could be converted into equity stakes for $2.5 billion in U.S. government assistance.
The Association of Value Airlines confirmed it asked Trump's a dministration to create a $2.5 billion liquidity pool to offset incremental fuel costs "as a necessary and targeted measure to stabilize operations and keep airfares affordable during this period of volatility."
They also asked Congress to suspend the 7.5% federal excise tax o n airline tickets and $5.30 per segment tax.
Waiving the fees would offset about one-third of the incremental cost of higher jet fuel.
A Spirit board meeting ended without an agreement to rescue the company, a person close to the discussions said late Friday.
"Unfortunately, despite the company's efforts, the recent material increase in oil prices and other pressures on the business have significantly impacted Spirit's financial outlook," Spirit said in a statement announcing "an orderly wind-down of operations."
All flights were canceled, the statement said, asking its customers not to go to airports.
Spirit had 4,119 domestic flights scheduled between May 1 and May 15, offering 809,638 seats, according to data from aviation analytics firm Cirium.
Global carriers are contending with surging jet fuel prices since the U.S.-Israeli strikes on Iran disrupted traffic through the Strait of Hormuz, in the air travel industry's worst crisis since the COVID-19 pandemic. Spirit already struggled to turn a profit before the fuel shock.
Spirit built its brand around affordable fares for budget-conscious travelers ready to eschew add-ons such as checked bags and seat assignments. That demand tapered off after the pandemic as passengers preferred to opt for comfort and experience-based travel.
Spirit's shutdown will benefit rivals such as JetBlue Airways and Frontier Airlines, also reeling from the cost shock.
Spirit's volatile over-the-counter stock plunged 25% Friday, while Frontier rose 10% and JetBlue gained 4%.
In an early sign competitors were ready to fill the gap, JetBlue said it would expand its service from Fort Lauderdale, one of Spirit's key markets, with 11 new cities and more flights on existing routes.
Trump said Friday the White House gave Spirit and its creditors a final rescue proposal after talks hit an impasse over a $500 million financing package that would have helped the airline keep operating through bankruptcy.
Spirit's collapse highlights the unintended consequences of the Iran war that Washington and Israel launched Feb. 28.
"More generally, the war's spillovers, if not contained, risk pushing other fragile businesses over the edge and severely burdening vulnerable households and economies alike," said Mohamed El-Erian, economist and senior global fellow at the Wharton School.
The collapse shows how the Iran war's fuel-price shock exposed weaker airlines.
Spirit's restructuring plan assumed jet fuel costs of about $2.24 a gallon in 2026 and $2.14 in 2027, but prices climbed to about $4.51 a gallon by the end of April, leaving the carrier unable to survive without fresh financing.
Jet fuel accounts for about a quarter of airlines' operating expenses.
Duffy told Reuters he tried to get many airlines to buy Spirit but found no takers. "If no one else wants to buy them," he said, "why would we buy them?"
A creditor close to the deal said: "The Trump administration made an extraordinary effort to try and save Spirit, but you can't breathe life into a corpse."
Spirit reached a deal with its lenders that would have helped it emerge from its second bankruptcy this year but the spike in jet fuel prices derailed those plans.
The airline flew about 1.7 million U.S. domestic passengers in February, with a 3.9% market share, down from 5.1% last year, Cirium data showed.
Major U.S. carriers rolled out rescue-fare options for affected passengers.
Frontier announced systemwide discounts and plans to add summer routes, JetBlue offered $99 fares through Wednesday, Southwest introduced special fares, United capped prices on one-way tickets and American added rescue fares while reviewing options to boost capacity on key routes.
