Spirit Airlines is facing a critical cash shortage and may require a government bailout to continue operations. The airline's lawyer, Marshall Huebner of Davis Polk, warned in a U.S. bankruptcy court hearing that the company's accessible cash will not last much longer. Huebner emphasized the need for new financing or access to $240 million in restricted cash by the end of next week to avoid shutdown.
The Trump administration is reportedly considering a $500 million loan package that could give the government a 90% stake in the airline. This potential deal has been shared with creditor groups, though details remain undisclosed. Spirit Airlines has been operating under bankruptcy protection since August 2023 and has faced multiple challenges, including an engine recall, a blocked acquisition by JetBlue Airways, and shifting customer preferences.
The airline's financial troubles have been exacerbated by a surge in fuel prices following the U.S. and Israel's attack on Iran. Spirit had projected fuel costs at $2.20 per gallon but is now paying nearly double that amount. A J.P. Morgan study estimates that the fuel price spike will add $360 million in operating costs, equal to the airline's cash cushion. Spirit's lawyer described the company as standing 'at the crossroads,' with significant funds locked away under bankruptcy terms.
The airline had initially expected to emerge from bankruptcy by midyear, but the rising fuel costs have complicated those plans. The potential government intervention marks a rare instance of a U.S. bailout designed for an individual airline, raising questions about the broader implications for the aviation industry.