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Bankrupt discount carrier Spirit Airlines ceased operations on Saturday, the industry’s first casualty linked to the war in Iran, after failing to secure creditor support for a U.S. government bailout plan.
The collapse of the first carrier due to a doubling in jet fuel prices during the two-month-old war will cost thousands of jobs. It is a blow to U.S. President Donald Trump, who had proposed $500 million US to save Spirit despite opposition from some of his closest advisers and many Republicans in Congress.
No U.S. carrier of Spirit’s size — it accounted for five per cent of U.S. flights at one point — has liquidated in two decades. Spirit helped keep fares lower in markets where it competed against major carriers.
All flights cancelled
A Spirit board meeting had ended without an agreement to rescue the company, a person close to the discussions told Reuters late on Friday.
“Unfortunately, despite the company’s efforts, the recent material increase in oil prices and other pressures on the business have significantly impacted Spirit’s financial outlook,” Spirit said in a statement announcing “an orderly wind-down of 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 spokesperson said Spirit had notified the U.S. Federal Aviation Administration before halting operations, declining to comment further.
Global carriers are contending with surging jet fuel prices after the U.S.-Israeli strikes on Iran starting on Feb. 28 disrupted shipping traffic through the Strait of Hormuz. Spirit was already struggling to turn a profit before the fuel shock.
Spirit built its brand around affordable fares for budget-conscious travellers ready to eschew add-ons like checked bags and seat assignments.
That demand tapered off quickly after the COVID-19 pandemic, as passengers preferred to opt for comfort and experience-based travel, leaving ultra-low-cost carriers struggling to adapt.
Planning an international trip this summer? The International Energy Agency warns Europe may run out of jet fuel in six weeks due to the global energy supply crunch amid war in the Middle East. Werner Antweiler, associate professor at UBC’s Sauder School of Business, spoke to BC Today host Michelle Eliot. He said people travelling to Asia and Europe, where countries rely on Middle East oil, should plan for flight cancellations while there.
Spirit’s shutdown will benefit its rivals like JetBlue Airways and Frontier Airlines, who themselves are reeling from the cost shock. Spirit’s volatile over-the-counter stock plunged 25 per cent on Friday, while Frontier rose 10 per cent and JetBlue gained four per cent.
Trump said on Friday that the White House had given Spirit and its creditors a final rescue proposal, after talks hit an impasse over a $500-million financing package that would have helped the airline keep operating through bankruptcy.
“If we can help them, we will, but we have to come first,” Trump told reporters. “If we could do it, we’d do it, but only if it’s a good deal.”
Fuel price shock threatens weaker airlines
The collapse shows how the war’s fuel price shock has exposed weaker airlines.
Spirit’s restructuring plan assumed jet fuel costs of about $2.24 a gallon in 2026 and $2.14 in 2027, but prices climbed to about $4.51 a gallon by the end of April, leaving the carrier unable to survive without fresh financing.
U.S. Transportation Secretary Sean Duffy told Reuters he had tried to get many airlines to buy Spirit but found no takers. “What would someone buy?” Duffy asked. “If no one else wants to buy them, why would we buy them?”
A creditor close to the deal said, “The Trump administration made an extraordinary effort to try and save Spirit, but you can’t breathe life into a corpse. Given that, the company should make its intentions clear for the sake of its customers and employees.”
Spirit had reached a deal with its lenders that would have helped it emerge from its second bankruptcy by late spring or early summer.
But those plans derailed after the war triggered a spike in jet fuel prices, upending Spirit’s cost projections and complicating its bankruptcy exit.
With fuel prices more than doubling since the war in the Middle East began, one of the main places Canadians may feel the war’s impact is air travel. The head of the International Energy Agency says Europe has ‘maybe six weeks or so [of] jet fuel left.’ CBC’s Ashley Fraser speaks to travel experts about what to expect over the next few months.
The airline flew about 1.7 million U.S. domestic passengers in February, with a 3.9 per cent market share, down from 5.1 per cent last year, Cirium data showed.
After Spirit’s announcement, major U.S. carriers rolled out rescue-fare options for affected passengers. Frontier announced systemwide discounts and plans to add summer routes, JetBlue offered $99 fares through Wednesday, Southwest Airlines introduced special fares, United Airlines capped prices on one-way tickets and American Airlines added rescue fares while reviewing options to boost capacity on key routes.
Last month Trump said his administration was looking to buy the embattled carrier at the “right price.” Sources said the administration had proposed $500 million in financing in exchange for warrants equivalent to 90 per cent of Spirit’s equity.
There had been disagreements inside the Trump administration over whether and how to fund the bailout, the Wall Street Journal reported, citing people familiar with the matter.
