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Cash-strapped discount carrier Spirit Airlines suspended operations on Saturday, the first casualty of the industry linked to the Iran war, after failing to secure creditor support from a US government bailout.
The collapse of the first carrier due to the doubling of the price of jet fuel during the two-month war in Iran will cost thousands of jobs. It is a mistake for President Donald Trump, who had proposed $500 million US to rescue Spirit despite opposition from some of his closest advisers and many Republicans in Congress.
No carrier the size of US Spirit – it handled 5 percent of US flights at one time – has been out of business for two decades. Spirit has helped keep fares low in markets where it competes with major carriers.
All flights are cancelled
Spirit’s board meeting ended without an agreement to rescue the company, a person close to the talks told Reuters late on Friday.
“Unfortunately, despite the Company’s efforts, the recent increase in oil prices and other business pressures have had a significant impact on Spirit’s financial outlook,” Spirit said in a statement announcing the “orderly reduction in operations.”
All flights have been cancelled, the statement said, asking passengers not to go to the airport.
Spirit had 4,119 domestic flights scheduled between May 1 and May 15, offering 809,638 seats, according to data from aviation analytics firm Cirium.
A spokeswoman said Spirit notified the Federal Aviation Administration before suspending operations, declining to comment further.
Cargo companies around the world are grappling with rising jet fuel prices after US-Israeli strikes on Iran disrupted traffic in the Strait of Hormuz. Spirit was already struggling to turn a profit before the fuel burn.
Spirit has built its brand on affordable fares for budget-conscious travelers who are ready to eschew extras like checked bags and seat assignments.
That demand quickly waned after the COVID-19 pandemic, as passengers preferred to choose luxury and experience-based travel, leaving low-cost carriers struggling to adapt.
Planning an international trip this summer? The International Energy Agency is warning Europe that it could run out of jet fuel in six weeks due to a global power outage during the Middle East war. Werner Antweiler, associate professor at UBC’s Sauder School of Business, spoke with BC Today host Michelle Eliot. He said people traveling to Asia and Europe, where countries depend on Middle Eastern oil, should plan for flight cancellations while there.
Spirit’s shutdown will benefit its rivals such as JetBlue Airways and Frontier Airlines, which are also reeling from cost shocks. Spirit’s volatile stock fell 25 percent on Friday, while Frontier rose 10 percent and JetBlue gained 4 percent.
Trump said on Friday that the White House had offered Spirit and its creditors a final bailout proposal, after talks were strained over a $500 million US financial package that would help the airline continue operating in bankruptcy.
“If we can help them, we will help them, but we have to come first,” Trump told reporters. “If we could, we would, but only if it’s a good deal.”
Fuel price shocks threaten fragile airlines
The collapse shows how the fuel price shock of the Iran war has exposed vulnerable airlines.
Spirit’s restructuring plan assumed jet fuel costs of about $2.24 a gallon in 2026 and $2.14 a gallon in 2027, but prices rose to about $4.51 a gallon by the end of April, leaving the carrier unable to survive without the new funds.
Transportation Secretary Sean Duffy told Reuters that he had tried to get several airlines to buy the Spirit but they had no takers. “What would a person buy?” Duffy asked. “If no one else wants to buy them, why are we going to buy them?”
A lender close to the deal said, “The Trump administration has made an incredible effort to try to save Spirit, but you can’t breathe on a corpse. Given that, the company needs to clarify its intentions for the sake of its customers and employees.”
Spirit has reached an agreement with its creditors that could help it emerge from bankruptcy for the second time in late spring or early summer. But those plans fell through after the war caused a spike in jet fuel prices, raising Spirit’s cost projections and making its exit difficult.
With fuel prices more than doubling since the start of the war in the Middle East, one of the main places Canadians are likely to feel the impact of war is through air travel. The head of the International Energy Agency says that Europe is ‘probably six weeks or more [of] jet fuel left.’ CBC’s Ashley Fraser talks to travel experts about what to expect in the next few months.
The airline flew about 1.7 million US domestic passengers in February, with a market share of 3.9 percent, down from 5.1 percent a year earlier, Cirium data said.
After Spirit’s announcement, major US carriers released boarding options for affected passengers. Frontier announced system discounts and plans to add summer routes, JetBlue offered $99 fares through Wednesday, Southwest introduced special fares, United slashed prices for one-way tickets and American added savings while reviewing options to improve capacity on key routes.
Last month Trump said his administration was looking to buy the company involved “at the right price.”
Sources said management proposed US$500 million for warrants equivalent to 90 percent of Spirit’s equity.
There has been disagreement within the Trump administration over how and when the bailout will be funded, the Wall Street Journal reported, citing people familiar with the matter.
