WASHINGTON, May 2 (Reuters) – Low-cost airline Spirit Airlines becoming the industry’s first casualty linked to the Iran war after failing to win creditor support for a U.S. government rescue plan.
The collapse of the US airline, after jet fuel prices doubled during the war in Iran, will cost thousands of jobs. The bankruptcy is also a blow to President Donald Trump, who had proposed $500 million to save Spirit despite opposition from some of his closest aides and many Republicans in Congress.
No North American airline of Spirit’s size — which accounted for 5% of US flights at one point — has been liquidated in two decades. Spirit helped maintain lower fares in markets where it competed with major airlines.
FLIGHTS CANCELED, RIVALS BENEFITED
A Spirit board meeting 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,” the company said in a statement announcing “an orderly cessation of operations.”
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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.
Global carriers are struggling with rising jet fuel prices since Israeli and U.S. attacks on Iran disrupted traffic through the Strait of Hormuz. This is the worst crisis in the air travel sector since the Covid-19 pandemic. Spirit was already struggling to turn a profit before the fuel shock.
The company has built its brand around affordable fares for budget-conscious travelers willing to avoid add-ons like checked bags and seat assignments. This demand decreased after the pandemic, as passengers preferred to opt for comfort and experience-based travel, leaving ultra-low-cost carriers struggling to adapt.
Spirit’s shutdown will benefit rivals like JetBlue Airways and Frontier Airlines, which are also suffering from the cost shock. Spirit’s volatile over-the-counter shares fell 25% on Friday, while Frontier rose 10% and JetBlue gained 4%.
In an early sign that competitors were ready to fill the gap, JetBlue said it would expand its service from Fort Lauderdale, one of Spirit’s key markets, with 11 new cities and more flights on existing routes.
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Trump said on Friday that the White House had given Spirit and its creditors a final bailout proposal after negotiations reached an impasse over a $500 million financing package that would have helped the airline continue operating during bankruptcy.
“If we can help them, we will, but we have to come first,” Trump told reporters. ‘If we can do it, we will, but only if it’s a good deal.’
