A Spirit Airlines plane at LaGuardia Airport in New York.
Leslie Josephs/CNBC
The liquidity available to Spirit Airlines to continue operating will not last long and a government bailout plan is on the table, a lawyer for the troubled budget airline said at a hearing Thursday.
The company needs access to existing liquidity or new financing in the coming days to continue operationssaid Marshall Huebner of Davis Polk, the airline’s lawyer.
“The liquidity that Spirit currently has to fund ongoing operations will not last very long,” he said. “So either new financing or access to almost $240 million in restricted liquidity is absolutely essential. No later than the end of next week.”
Spirit is in “advanced” talks with the Trump administration to secure financing that would allow the carrier to stay afloat, Huebner said during a hearing in U.S. Bankruptcy Court in New York. The iconic Florida discounter is in danger of closing its doors.
Huebner did not present that plan in court, but people familiar with the matter told CNBC that a $500 million loan was on the table, which would give the government a potential 90% stake in the Florida-based airline.
The potential deal was shared with different creditor groups, according to the people who requested anonymity because they were not authorized to discuss the negotiations.
Spirit expected to emerge from bankruptcy mid-year, but a soaring fuel prices Since the United States and Israel attacked Iran, those plans have been complicated, the company said.
The iconic discount airline has been facing problems for years, including an engine recall, acquisition by JetBlue Airways that a federal judge blocked two years ago, shifting customer preferences toward more premium offerings and a increased costseven before fuel prices climbed this year.
“Spirit now definitely finds itself at a crossroads,” Huebner said, with “several hundred million dollars” of the company’s cash “locked up and inaccessible” under the terms of the bankruptcy loan while other funds are in separate accounts for payroll and taxes.
Huebner said the additional funding would “create a fierce and properly capitalized competitor in the airline industry” as a standalone carrier, “but also potentially as the most powerful player in what many believe will happen next, which is consolidation in the value carrier industry,” hinting at a potential merger.
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