Spirit Prepares Shutdown as Trump Says He Made Final Offer
(Bloomberg) -- President Donald Trump said he delivered a final proposal to rescue Spirit Aviation Holdings Inc. but would only proceed if it’s a good deal for the US government — comments that cloud the fate of any bailout as the low-budget carrier lays the groundwork to end operations.
Spirit, buffeted by the recent surge in fuel costs, had been in talks with the US government on rescue financing, but those conversations hit an impasse in recent days, Bloomberg previously reported. In the meantime, the airline is running increasingly low on cash, according to people familiar with the matter who asked not to be named because the information is private.
The airline is making preparations to wind down as its liquidity position worsens and the prospects of winning a bailout dim, said the people.
“If we can do it, we’d do it, but only if it’s a good deal.” Trump told reporters Friday at the White House. He said his administration would make an announcement Friday or Saturday about the matter, without specifying further.
He also said any deal would put the US government ahead of other lenders so that its claims get first priority if the airline fails. “We come first,” Trump said. “USA first.”
A spokesperson for Spirit said the airline is operating as usual and declined to comment on ongoing discussions. Representatives the Commerce Department and the Transportation Department didn’t immediately respond to requests for comment.
American Airlines Group Inc. and United Airlines Holdings Inc. both said in statements that they’re prepared to help Spirit customers and employees who may be left stranded if the airline shuts down.
“To help customers whose travel may be disrupted, we immediately implemented fare caps on Main Cabin tickets for Spirit routes where we also offer nonstop service,” American added in a statement.
Spirit had planned to exit bankruptcy by the summer after reaching an agreement with creditors on a plan to trim billions of dollars in debt and reduce the cost of its fleet. Higher fuel costs stemming from the ongoing war in the Middle East instead put the carrier at risk of liquidation.
The airline for the last several weeks has been discussing terms of a possible bailout with the Trump administration where the government would provide up to $500 million in financing in exchange for warrants to purchase as much as 90% of the company once it emerges from bankruptcy.
Trump on April 23 said he was considering having the US purchase Spirit, saying it could be a potentially good investment for the federal government. He’d expressed a willingness earlier in April to provide federal assistance to the carrier.
Spirit isn’t the only airline that’s suffering as a result of the US-Iran war. The chief executives of other budget carriers met with Transportation Secretary Sean Duffy and other senior government officials on April 21 to discuss the challenges they face.
The Association of Value Airlines, which represents low-cost carriers including Frontier Group Holdings Inc. and Allegiant Travel Co., has asked the government for $2.5 billion to help its members combat increasing jet fuel prices.
The group also wrote to congressional leaders on April 14 to request temporary relief from certain fees and taxes, including a suspension of the 7.5% federal excise tax on airline tickets, according to a letter seen by Bloomberg News.
Spirit shares fell as much as 74% on Friday after the Wall Street Journal earlier reported that Spirit was preparing to cease operations. Shares of peers including JetBlue Airways Corp. and Frontier Group Holdings Inc. traded higher.
(Updates with American, United statements from seventh paragraph.)
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