US President Donald Trump’s administration has moved closer to a deal aimed at rescuing Spirit Airlines, a struggling budget airline facing mounting financial pressure. The plan would involve the US government lending up to $500 million to the airline in exchange for warrants, reported The Wall Street Journal. This could later give the government a stake in the company. 

As per the the report, talks advanced in recent days as officials weigh the risks of letting the carrier collapse. Spirit has warned that it could face liquidation if conditions do not improve. The airline has already filed for Chapter 11 bankruptcy twice within a year.

Challenges faced by Spirit Airlines

Spirit built its business on ultra-low fares and a no-frills model. It attracted price-sensitive travelers willing to skip extras such as checked bags and seat selection. That model worked for years, but costs have risen sharply. Fuel prices have surged after disruptions linked to US-Israeli strikes on Iran, which affected shipping routes through the Strait of Hormuz.

The airline had based its recovery plan on fuel prices of around $2.24 per gallon in 2026 and $2.14 in 2027. By mid-April, prices had climbed to about $4.24 per gallon. 

Spirit also faced other setbacks. Engine recalls disrupted operations. Consumer preferences shifted toward more comfort and bundled services, reported The Wall Street Journal. A proposed merger with JetBlue Airways failed after a court blocked the deal. That decision removed a key lifeline that could have stabilized the airline.

The company now plans to shrink its fleet to about one-third of its size before bankruptcy. It expects to operate around 76 to 80 aircraft by the third quarter of 2026. The goal is to focus on profitable routes and peak travel periods.

What US President Donald Trump said

President Trump said he would prefer a private buyer but did not rule out federal involvement. He pointed to the risk of job losses, with about 14,000 positions tied to the airline.

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.