The Trump administration is publicly mulling whether to step in to save the beleaguered ULCC from collapse.
US President Donald Trump is considering handing a government bailout to Spirit Airlines, which is reportedly running on fumes amid surging jet fuel prices.
During a 21 April CNBC interview, Trump encouraged a competitor to step in and acquire Spirit with the USA’s war in Iran sending jet fuel prices skyward. He also stated that he is directing “my people” to look into a rescue package to avoid the carrier’s outright collapse.
“I don’t mind mergers,” he says. “I think I’d love somebody to buy Spirit as an example. You know, Spirit’s in trouble, and I’d love somebody to buy Spirit. Spirit is 14,000 jobs, and maybe the federal government should help that one out.”
On the same day, the Wall Street Journal reported that the federal government could loan Spirit as much as $500 million, ostensibly to keep the ultra-low-cost carrier (ULCC) operating as it attempts to emerge from its second round of Chapter 11 bankruptcy restructuring.
Bloomberg has reported that, in return, the US federal government could take up to a 90% stake in Spirit. While that would represent a highly unusual move, the Trump administration notably took a 10% stake in chip-making company Intel last year.
White House Press Secretary Karoline Leavitt blamed the Biden administration’s decision to block JetBlue Airways’ $3.8 billion acquisition of Spirit for the ULCC’s most recent struggles during a 22 April press briefing.
“I understand the airline is bankrupt because the previous administration blocked the merger, which was probably not a wise move,” she says. “Obviously, this is something the commerce department and the president are tracking. I don’t have any updates or announcements, but 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.”
LONGSTANDING STRUGGLES
Spirit’s financial difficulties began well before its combination with JetBlue was blocked by a US federal judge in January 2024, though that decision was a major trigger of the carrier’s first bankruptcy. The US Department of Justice argued that the deal would raise fares for price-sensitive travellers and erode competition in the low-cost airline space.
The ULCC has consistently failed to be profitable since the beginning of the Covid-19 pandemic, posting hundreds of millions in losses as US market has shifted away from bare-bones discount models toward more premium offerings. Spirit has struggled to adjust its products quickly enough to respond to the shifting market dynamics.
The carrier was also among the hardest-hit US airlines by Pratt & Whitney’s geared turbofan (GTF) recall, which grounded double-digit numbers of its Airbus A320neo-family jets on a rolling basis for the past few years. Spirit has since rejected the leases of dozens of newer Airbus narrowbodies in one of the most dramatic fleet-trimming actions in recent memory, reducing its GTF burden but also leaving it with an ageing, less-efficient fleet.
Those factors led Spirit into its first bankruptcy in November 2024 and emerged just four months later. Company leadership later admitted efforts to restructure the business had been inadequate, and Spirit re-entered Chapter 11 in August – beginning a far more extensive and painful reduction of its fleet and network, exiting dozens of domestic US markets. Spirit had previously planned to exit court-supervised restructuring later this spring or early in the summer.
Even prior to the energy shocks associated with the USA’s war in Iran and closure of the Strait of Hormuz, questions surrounded Spirit’s ability to continue as a standalone business. Executives have previously acknowledged that the company’s exit strategy could involve an acquisition by a rival carrier, with many pointing to Frontier Airlines as the most likely suitor.
The US airline sector is abuzz with consolidation chatter, with the likes of Delta Air Lines executive Ed Bastian and United Airlines CEO Scott Kirby predicting that higher jet fuel prices will force weaker players out of the market.
Kirby, a longtime critic of the ULCC model, has predicted Spirit’s demise for many months and doubled down on that critique during his airline’s 22 April earnings call.
“I feel bad for the people of Spirit, but it’s been pretty obvious that Spirit’s business model was fundamentally flawed in that the airline was not going to be able to make it or cover their cash operating costs,” he says. “I hope it doesn’t happen.”
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