Spirit Airlines’ cash ‘not going to last for very much longer’
A Spirit Airlines plane at New York’s LaGuardia Airport.
Leslie Josephs/CNBC
Spirit Airlines’ accessible cash won’t last long and a government bailout is on the table, a lawyer for the budget-strapped company said at a hearing on Thursday.
The airline’s attorney, Marshall Huebner of Davis Polk, said the company must access existing cash or new funds within the next few days to continue operations.
“The cash available to Spirit to fund ongoing operations will not last very long,” he said. “So new financing, either new financing or both, or access to limited cash of almost $240 million is absolutely essential. By the end of next week at the latest.”
Huebner told the US bankruptcy court hearing in New York that Spirit was in “advanced” discussions with the Trump administration for financing that would keep the carrier afloat. The iconic Florida discount store is at risk of closing.
Huebner did not outline the plan in court, but people familiar with the matter told CNBC that a $500 million loan is on the table that would give the government a potential 90% stake in the Florida-based carrier.
The potential deal has been shared with various creditor groups, according to the people, who asked to remain anonymous because they were not authorized to discuss the talks.
The company had expected Spirit to emerge from bankruptcy by the middle of the year, but the rise in fuel prices since the U.S. and Israel attacked Iran had complicated those plans, it said.
The iconic discount airline has been facing issues such as engine recalls and acquisitions for years. JetBlue Airlines It was a move that a federal judge blocked two years ago, even before this year’s increase in fuel prices shifted customer preferences to more luxurious offerings, leading to a rise in costs.
“Spirit is definitely at a crossroads now,” Huebner said, with “several hundred million dollars” of the company’s cash “locked up and inaccessible” under the terms of the bankruptcy loan, while other funds are in separate accounts for payroll and tax payments.
Huebner said the additional financing would “create a properly capitalized, fierce competitor in the airline space” as an independent carrier, “while also potentially being the strongest player in consolidation in the value carrier space, which is what many believe needs to happen next,” pointing to a potential merger.
