A Spirit commercial airliner prepares to land at San Diego International Airport, California, United States, January 18, 2024.
Mike Blake | Reuters
The Trump administration is in advanced talks for a financial package for Spirit Airlines, as the carrier faces the risk of a liquidationaccording to people familiar with the matter.
The deal could include $500 million in government funding, which could give the government access to an equity stake in the carrier, said the sources, who requested anonymity because they were not authorized to discuss the negotiations. This preferred funding would put the government ahead of the airline’s other stakeholders, one of the sources said.
The iconic discounter Spirit has been facing rising costs, changing consumer tastes, an engine recall and a plan blocked by the court to be acquired by JetBlue Airways two years ago.
“Spirit Airlines would be on much stronger financial footing if the Biden administration had not recklessly blocked the airline’s merger with JetBlue,” White House spokesperson Kush Desai said in a statement to CNBC. “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.”
Spirit was facing potentially imminent liquidation, people familiar with the matter told CNBC last week, speaking on condition of anonymity to discuss matters that had not yet been made public. The Dania Beach, Fla.-based carrier filed for its second Chapter 11 in August. bankruptcy in less than a year, after struggling to increase revenue to cover rising costs.
President Donald Trump hints at the potential government assistance Tuesday, telling CNBC “Scream box,” “Spirit is in trouble, and I wish someone would buy Spirit. That’s 14,000 jobs, and maybe the federal government should help that one out. »
THE Wall Street Journal had earlier indicated that the talks were at an advanced stage.
“We hope the government will recognize the need for emergency funds, particularly in the current economic environment,” a spokesperson for the Association of Flight Attendants-CWA, which represents Spirit cabin crew, said in a statement. “The last thing our economy needs is tens of thousands more people out of work, and the last thing travelers need is fewer choices when it comes to air travel.”
The final terms of the deal and what the airline will receive could still change.
Spirit declined to comment on the discussions.
“We are operating as normal; customers can continue to book, travel and use tickets, credits and loyalty points as usual,” the airline said in a statement.
The American airline industry has accepted more than $50 billion in taxpayer aid to deal with the Covid-19 pandemic, which remains the greatest crisis ever known, but these funds were not given to any particular airline. Part of the aid given to the American government stock warrants for airlines.
Learn more about Spirit Airlines’ recent challengesAirlines also received a government bailout following the terrorist attacks of September 11, 2001, but that money was also intended for several companies. In 2008-2009, the United States also bailed out the auto industry during the financial crisis and took stakes in manufacturers.
The Trump administration took shareholdings in some companies this is deemed critical to national security, such as Intel And Rare Earth from the United Statesalthough Spirit stands out because it is bankrupt.
In February, Spirit said it planned to emerge from bankruptcy in late spring or early summer, telling a U.S. court it would scale back operations and focus its planes on high-demand routes and travel periods. Pilot and flight attendant unions had also made concessions, including granting furloughs in recent months, in an effort to help Spirit survive.
But since then, jet fuel prices have nearly doubled in some parts of the United States, further complicating the challenges for Spirit and the rest of the airline industry.
As a low-cost airline that also faces competition from major carriers offering their own no-frills basic economy offerings, it has become increasingly difficult for Spirit to cover its expenses. Spirit had introduced more legroom seats and other premium options in an attempt to cater to higher-spending customers.
Read more airline news CNBCCorrection: This article has been updated to correct the name of the Association of Flight Attendants-CWA.
