Spirit Airlines is preparing to shut down operations after it failed to secure a $500 million financial rescue package, according to a report by The Wall Street Journal. The airline could not get enough support from bondholders and government officials to secure the emergency funding it needed to keep flying.
At the same time, shares of rival airlines rose sharply. Investors appeared to believe other carriers could benefit if Spirit exits the market. Southwest Airlines shares climbed 3%, while JetBlue Airways rose 6%. Frontier Group Holdings gained 8%. Shares of Delta Air Lines, American Airlines, and United Airlines also moved higher after the report.
However, the Spirit Airlines has not issued any official statement yet.
Financial hurdles for Spirit Airlines
Earlier, US President Donald Trump said his administration was considering a taxpayer-backed takeover of Spirit Airlines as the company battled a deep financial crisis.
Speaking during an unrelated event at the Oval Office on Thursday, Trump said the government could temporarily take control of the airline and later sell it once fuel prices fall and market conditions improve, reported WSJ.
“They have some good aircraft and good assets,” Trump said. “I’d love to be able to save those jobs. I’d love to be able to save an airline,” he added.
Spirit Airlines, known for its ultra-low ticket prices and no-frills service, has struggled for months under heavy debt and rising operating costs. The airline also faced problems after several merger attempts failed, leaving it with fewer options to improve its finances.
Higher fuel prices, maintenance expenses, and strong competition from larger airlines added to the company’s troubles. Industry analysts say Spirit’s low-cost business model became harder to sustain as expenses increased across the aviation sector.
During the Covid-19 pandemic, US airlines received over $50 billion in aid, reported CNBC. Some of that support included stock warrants, which allowed the government to benefit if companies recovered.
Similar actions took place after the September 11 attacks and during the 2008–2009 financial crisis, when the government took stakes in major industries.
Spirit had earlier told a US court that it expected to exit bankruptcy by late spring or early summer. It has already cut costs, reduced operations, and secured concessions from unions. Pilots and flight attendants accepted furloughs to help the company survive.
All about Spirit Airlines
Spirit Airlines is a low-cost airline in the United States. The airline started in 1983 and is based in Dania Beach near Fort Lauderdale. Over the years, Spirit expanded its flights across the US, Latin America, and the Caribbean.
Spirit gained popularity by offering low base fares. Passengers were typically charged additional fees for baggage, seat selection, food, and other services. This strategy allowed the airline to maintain ticket prices below those of many competitors. However, customers frequently criticized the extra charges, flight delays, customer service, and limited seat space.
The company mainly uses Airbus planes, especially aircraft from the Airbus A320 family.