Clock ticks on Spirit Airlines as bondholders weigh Trump bailout
The future of Spirit Airlines will remain uncertain next week as President Donald Trump says the government could bail out the airline and the discount-fighting airline’s lenders consider a potential deal.
“We’re considering doing that, helping them, meaning bailing them out or buying them,” Trump told reporters in the Oval Office on Thursday.
“I’d love to be able to save those jobs. I’d love to be able to save an airline. I like to have a lot of airlines, so it’s competitive,” Trump said.
The White House and major bondholders either did not immediately comment or declined to comment.
Trump told reporters the government “might sell oil” when “the price of oil drops” [Spirit] for profit.”
Spirit was expected to emerge from bankruptcy by mid-year, but that was before US-Israeli attacks on Iran led to a rise in jet fuel costs. Spirit had an operating loss of about $28.3 million in February, according to a court filing; This was before the increase in fuel prices hit carriers and travelers’ wallets.
Spirit, the iconic budget carrier known for its bright yellow planes and no-frills service that has become a punch line for late-night comedians, has struggled to survive. The industry’s costs have increased post-Covid as customers’ tastes shift towards more luxury offerings and international destinations.
Spirit has aggressively cut costs by selling aircraft and shrinking its network. Spirit operated 19,575 flights last May, according to aviation data firm Cirium. 9,353 working this May.
Planned acquisition of Spirit JetBlue Airlines It was successfully challenged by the Biden administration, which the Trump administration said had damaged Spirit.
“Spirit Airlines would be on a much stronger financial footing if the Biden administration had not recklessly blocked the airline’s merger with JetBlue,” a White House spokesman said in an email. “The Trump administration continues to monitor the status and overall health of the U.S. aviation industry, which millions of Americans rely on every day for essential travel and livelihoods.”
Will others follow the same path?
Some industry members and analysts have suggested that other airlines, especially low-cost carriers, may seek similar help from the government.
Low-cost airlines met with Transportation Secretary Sean Duffy earlier this week to discuss the current increase in fuel costs, people familiar with the matter told CNBC.
While the Trump administration has taken stakes in companies it deems to be of national security interest, companies ranging from automakers to banks to the airline industry have received bailouts in the past, but it is highly unusual for the government to bail out a single company.
Delta Airlines And United Airlines It accounts for most of the airline industry’s profits in the United States; It spends years and billions of dollars to successfully persuade a less price-sensitive customer base willing to pay for larger seats and expansive international networks, among other benefits. Many other carriers, including Spirit, have struggled to catch up in recent years.
“We wonder whether a potential Spirit deal could become the last resort that other struggling carriers might seek in the future,” Barclays analyst Brandon Brandon Oglenski wrote in a note Thursday. he said.
possible deal
Terms of the tentative agreement apply to a $500 million loan that could eventually give the government a 90% stake in the Florida-based carrier, people familiar with the matter told CNBC. The potential plan would also put the government ahead of other investors, the sources said, requesting anonymity to discuss the terms.
A U.S. bankruptcy court hearing to discuss the potential deal could be held as early as Monday, according to comments made in court Thursday.
Akin’s attorney, Mike Stamer, who is representing the bondholders in the bankruptcy case, confirmed in court Thursday that “we actually received a copy of the term sheet” regarding a potential loan deal from the U.S. government; This is a sign of how far the talks have progressed.
The deal would also allow the U.S. government to choose a board member, a person familiar with the potential terms told CNBC.
Spirit’s labor unions are also pushing for a deal.
“Any assertions that Spirit should be liquidated will only harm workers, passengers and further strain our economy,” the Flight Attendants Association-CWA said in a statement Thursday. he said. “This is unnecessary and malicious behavior when a little help can prevent major harm.”
Spirit’s attorney, Marshall Huebner of Davis Polk, said in bankruptcy court Thursday that the loan would help Spirit regain “independent fighting form” but could also prepare it for a potential merger.
But acquisition talks have previously failed, most recently with Frontier Airlines, which had planned to merge with Spirit until a surprise cash offer from JetBlue.
Conor Cunningham, an airline analyst at Melius Research, said Spirit’s challenges may not go away either.
“How deep does he want to go?” He talked about Trump and the possible rescue deal. “$500 million is probably not enough.”
