Discount carrier Spirit Airlines, a subsidiary of Spirit Aviation Holdings Inc., is moving toward a total shutdown of operations following its failure to garner necessary creditor support for a federal bailout, according to a Friday report by The Wall StreetJournal.
In the wake of this news, Spirit’s stock price cratered by up to 74%, whereas competitors such as JetBlue Airways Corp. and Frontier Group Holdings Inc. saw their share prices rally.
Earlier this week, Bloomberg News reported that negotiations regarding a possible $500 million government-backed rescue package had reached a stalemate. A key group of lenders, including Citadel, reportedly opposed the proposed terms, as the deal would likely have resulted in significant losses on their existing claims and recovery prospects. This development marks a critical turning point for the struggling airline.
Last month, US President Donald Trump indicated his administration’s interest in acquiring the struggling airline at the correct valuation.
Subsequent reports suggested the government offered $500 million in financing in return for warrants representing 90% of Spirit’s total equity.
However, internal friction within the Trump administration regarding the funding and structure of the bailout complicated the deal, according to Reuters citing sources familiar with the discussions.
Additionally, the WSJ report said that several Spirit bondholders remained opposed to the proposed terms.
Consequently, a rescue hearing intended for Thursday, April 30, was canceled as negotiations over the $500 million package persisted without resolution.
The airline’s collapse would represent the first major aviation industry casualty stemming from the conflict in Iran.
Previously, Spirit had negotiated a restructuring agreement with lenders designed to facilitate its exit from a second bankruptcy by early summer. These efforts were derailed after hostilities in Iran caused jet fuel prices to surge, shattering Spirit’s financial forecasts.
The carrier’s recovery strategy was predicated on jet fuel averaging $2.24 per gallon in 2026 and $2.14 in 2027, per March filings.
By late April, however, costs had soared to approximately $4.51 per gallon—double the initial projections used for the bankruptcy exit plan. This drastic price hike effectively rendered the airline’s turnaround plan unfeasible under current market conditions.
United Airlines prepares to support Spirit customers, workers if bankrupt carrier shuts down
United Airlines said on Friday it was preparing to support Spirit Airlines customers and employees in case the bankrupt carrier shuts down its operations.
The comments came amid reports that Spirit is preparing to cease operations after hitting an impasse in talks with some creditors on a $500 million government bailout plan.
