Why a federal bailout of Spirit might not be enough to save the struggling airline

By Chris Isidore, CNN

(CNN) — The Trump administration is interested in saving Spirit Airlines, even if it takes millions in federal assistance. But that might not be enough to rescue an airline that’s been on life support for years.

The administration is in “very advanced discussions” over a federal bailout package for the troubled discount airline, Marshall Huebner, an attorney for Spirit, said during a bankruptcy hearing Thursday. While he did not give details of the package, it could come to $500 million, a source familiar with the discussion told CNN.

Spirit has warned it could be forced out of business due to higher jet fuel prices in the last few months. The airline has been unprofitable since travel plunged during the Covid pandemic, and it has filed for bankruptcy twice, most recently in August 2025.

President Donald Trump seemed to endorse the idea on Tuesday, saying that “maybe the federal government should help (Spirit) out.”

But some members of Congress, along with airline CEOs and analysts, say it’s a terrible idea. Republican Senators Ted Cruz and Tom Cotton as well as Democratic Senator Elizabeth Warren have expressed concerns. The worry is that the government is throwing taxpayer money at a solution that will not save the airline long-term.

Even Trump’s Transportation Secretary Sean Duffy expressed doubts about a bailout on Tuesday.

“What we don’t want to do is put good money after bad, and there’s been a lot of money thrown at Spirit, and they haven’t found their way into profitability,” he told Reuters. “And so would we just forestall the inevitable and then own that?”

Severe turbulence ahead for Spirit

For years, Spirit was able to use its ultra-low fares to attract customers and fill planes. Then the Covid pandemic virtually halted travel and all airlines experienced deep losses, only surviving through the help of an industrywide federal bailout.

Although it survived, Spirit never really recovered from the pandemic. Even when demand for travel rebounded, most discount carriers continued to lose money. Passengers were willing to pay a bit more for seats with extra legroom or other comforts rather than choose bargain prices.

Airlines work on very thin profit margins, especially for those following Spirit’s business model. They incur high operating costs such as buying massively expensive aircraft and dealing with variable prices: Jet fuel, for example, has doubled in cost this year due to the war in Iran.

“It’s been pretty obvious that Spirit’s business model was fundamentally flawed and the airline was not going to be able to make it (even before the war-driven fuel spike),” United CEO Scott Kirby said on Wednesday.

Larger airlines with deeper pockets also have their own versions of Spirit’s low-fare model now. United, American and Delta airlines offer “basic economy” no-frills tickets on flights, taking away Spirit’s edge.

Kirby pointed out that United recently reported increased earnings, even with the rise in fuel prices.

“I don’t think this (fuel price) crisis (is) anywhere near big enough to cause the need for (an) airline bailout,” he said.

Spirit previously tried to find a merger partner to stay afloat – first Frontier, which was then outbid by JetBlue in 2022. But JetBlue’s $3.7 billion deal was blocked by a federal court in January 2024 on antitrust grounds.

Spirit announced a deal with creditors in February that would allow it to emerge from its latest bankruptcy with less debt and continue to fly. But three days later, the war in Iran started and fuel prices started surging.

Within two weeks, Spirit was once again warning it could be forced out of business.

Spirit attorney Huebner argued in court Thursday that a federal assistance package would allow the airline to get back on its feet by restructuring debt and selling aircraft and other assets

“Spirit was fixed and ready to emerge,” he said about the airline’s reorganization plans. “It was in great fighting shape before the events of the last few weeks.”

Steven McLean, a Spirit shareholder, disagreed. He challenged Spirit’s reorganization plans during the hearing Thursday and said fuel prices are “only a small part of the picture.”

“There are bigger issues with the progress of this plan than just the fuel prices,” he said.

The-CNN-Wire
™ & © 2026 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.