The clock is ticking for Spirit Airlines as bondholders weigh in on Trump bailout

The future of Spirit Airlines hangs in the balance over the next week as President Donald Trump says the government may bail out the airline, and the troubled discount carrier’s lenders weigh a potential deal.

“We’re looking at doing it, helping them out, meaning bailing them out or buying it out,” Trump told reporters in the Oval Office on Thursday.

“I wish I could save these jobs. I wish I could save an airline. I like having a lot of airlines, so it’s competitive,” Trump said.

The White House and major bondholders did not immediately comment or declined to comment on the matter.

Trump told reporters that “when the price of oil goes down,” the government could “sell [Spirit] for a profit. »

Spirit had hoped to emerge from bankruptcy by mid-year, but that was before U.S.-Israeli attacks on Iran led to rising jet fuel costs. Spirit posted an operating loss of nearly $28.3 million in February, according to a court filing, before soaring fuel prices hit carriers and travelers’ wallets.

Spirit, the iconic budget airline known for its bright yellow planes and simple service that became a punchline for late-night comedians, has struggled to survive. Industry costs exploded post-Covid as customer tastes shifted to more premium offerings and international destinations.

Spirit has cut costs aggressively, selling planes and shrinking its network. Last May, Spirit operated 19,575 flights, according to aviation data company Cirium. As of May this year, there are 9,353 in operation.

A planned acquisition of Spirit by JetBlue Airways was successfully challenged by the Biden administration, which the Trump administration said harmed Spirit.

“Spirit Airlines would be on much stronger financial footing if the Biden administration had not recklessly blocked the airline’s merger with JetBlue,” a White House spokesperson said via email. “The Trump Administration continues to monitor the situation and overall health of the U.S. aviation industry on which millions of Americans depend every day for essential travel and livelihoods.”

Some industry members and analysts have suggested that other airlines, particularly low-cost carriers, could seek similar help from the government.

Budget airlines met with Transportation Secretary Sean Duffy earlier this week to discuss the current surge in fuel costs, people familiar with the matter told CNBC.

The Trump administration has taken stakes in companies it considers to be in the national security interest, while companies ranging from automakers to banks to the airline industry as a whole have benefited from bailouts in the past, but it is highly unusual for the government to rescue a single company.

Delta Airlines And United Airlines account for most of the U.S. airline industry’s profits, spending years and billions of dollars to successfully woo a less price-sensitive customer base willing to pay for roomier seats and other perks, as well as extensive international networks. Many other carriers, including Spirit, have tried to catch up in recent years.

“We wonder if a possible deal with Spirit could become a last resort that other struggling carriers may seek in the future,” Barclays analyst Brandon Oglenski said in a note Thursday.

Terms of a tentative deal are for 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 project would also give the government a head start over other investors, said the sources, who requested anonymity to discuss terms.

A hearing in U.S. Bankruptcy Court to discuss a possible deal could take place as early as Monday, according to comments heard Thursday.

Mike Stamer, an Akin lawyer who represents the bondholders in the bankruptcy case, confirmed in court Thursday that “we have in fact received a copy of the term sheet” for the potential deal with a U.S. government loan, a sign of how far along the negotiations are.

The deal would also allow the U.S. government to select a board member, a person familiar with the potential terms told CNBC.

Spirit unions are also pushing for a deal.

“Any assertion that Spirit should simply liquidate will only harm workers, passengers and further strain our economy,” the Association of Flight Attendants-CWA said Thursday. “It’s unnecessary and petty, when just a little help can prevent considerable damage.”

Spirit’s attorney, Marshall Huebner of Davis Polk, said in bankruptcy court Thursday that the loan would help Spirit become “a standalone fighting form” but could also prepare it for a possible merger.

Acquisition talks have failed before, however, most recently with Frontier Airlines, which initially planned to merge with Spirit until a surprise cash offer from JetBlue.

Spirit’s challenges also may not go away, said Conor Cunningham, an airline industry analyst at Melius Research.

“How far does he want to go?” he said of Trump and the potential bailout deal. “$500 million is probably not enough.”