By David Shepardson, Rajesh Kumar Singh and Allison Lampert
WASHINGTON, April 22 (Reuters) – The Trump administration is nearing a deal to rescue low-cost carrier Spirit Airlines that could include up to $500 million in government-backed financing to help it keep operating through bankruptcy, three people familiar with the matter told Reuters.
The package would likely be a loan to keep Spirit running during bankruptcy, which would later become a longer-term loan when the airline exits bankruptcy, with warrants giving the U.S. government a potential stake of up to 90%, the sources said.
The discussions underscore one of the unintended consequences of the Iran war launched by Washington: a surge in jet fuel prices that has roughly doubled costs, squeezing margins and pushing weaker airlines closer to the brink.
For Spirit, which was already struggling to turn a profit before the fuel shock, the spike has intensified doubts about whether it can survive on its own.
President Donald Trump told CNBC on Tuesday that he would prefer to see Spirit acquired, but said government involvement was possible, signaling a willingness to intervene.
It remains unclear what authority the administration would use, and any intervention would be unusual outside broader industry relief programs. The Commerce and Transportation departments declined to comment.
White House press secretary Karoline Leavitt said the administration was tracking the situation but had no updates or announcements, adding the airline’s troubles followed the previous Biden administration’s decision to block its merger with JetBlue and that the White House wanted to see the “best possible outcome.”
During the pandemic, the U.S. Treasury received warrants in major airlines in exchange for aid under a $54 billion support program. It ultimately collected just $556.7 million from selling them, with many proving to have little value.
FUEL SHOCK HITS WEAKEST PLAYERS HARD
Airlines globally are grappling with a sharp rise in jet fuel prices after the U.S.-Israeli war on Iran disrupted oil flows through the Strait of Hormuz, forcing carriers to raise fares and cut unprofitable routes.
Spirit is particularly exposed.
The airline built its turnaround plan assuming fuel costs of about $2.24 a gallon in 2026 and $2.14 in 2027, according to its March disclosures. By mid-April, prices were around $4.24 a gallon — roughly double those levels.
That gap has undermined its restructuring strategy, which already relied on aggressive cost cuts and a smaller fleet. Spirit has said it plans to shrink to roughly 76 to 80 aircraft by the third quarter of 2026, about a third of its pre-bankruptcy size.
PRECEDENT RISKS EMERGE
J.P. Morgan analysts said Spirit seeking government aid was a scenario they had been debating, noting that higher fuel prices were now “impeding its planned reorganization” and raising the risk that liquidation could be imminent.
While the analysts said it made sense for Spirit to explore all possible sources of capital, they warned that any bailout could set a difficult precedent.
“Should the administration afford any sort of cash infusion, we believe JetBlue and Frontier would be inclined to quickly follow,” they said, adding that such a move could eventually draw in larger carriers and distort competition across the industry.
One industry source said other airlines that compete with Spirit have privately voiced opposition to a bailout of just one carrier, even as they face similar cost pressures.
United Airlines CEO Scott Kirby also struck a skeptical tone this week, calling Spirit’s business model fundamentally flawed and questioning whether it could cover its operating costs.
Transportation Secretary Sean Duffy raised similar concerns.
“What we don’t want to do is put good money after bad,” Duffy said in a Reuters interview. “Would we just forestall the inevitable and then own that?”
He added that it was unclear whether any buyer would emerge for Spirit. “If no one else wants to buy them, why would we buy them?” he said.
SPIRIT EXIT COULD BOOST FARES
Analysts and industry officials also say Spirit’s potential collapse could reshape competition in key markets. Its exit would materially reduce capacity in places such as Fort Lauderdale, boosting fares and strengthening pricing power for surviving airlines, including rivals like JetBlue and Frontier.
Duffy warned that rescuing one struggling airline could open the door to broader intervention. “If you do Spirit, who comes next?” he said. “If Spirit goes away, it’s better for JetBlue. If we bail out Spirit, I can’t imagine that JetBlue would love that.”
Spirit declined to comment on the talks but said it continues to operate normally.
(Reporting by David Shepardson in Washington, Rajesh Kumar Singh in Chicago and Allison Lampert in Montreal Nathan Gomes in Bengaluru; Editing by Shreya Biswas, Devika Syamnath, Aurora Ellis, Rod Nickel)
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