How Spirit Airlines’ business model collapsed—and why a Trump bailout could make things worse
During a CNBC interview on April 21, President Trump for the first time hatched the possibility of an administration-led rescue plan for stricken Spirit Airlines. “Spirit’s in trouble,” declared the POTUS, “Maybe the federal government should help out on that one…it’s 14,000 jobs.” Prior to Trump’s statement, few if any were speculating on such a solution. Indeed, though the U.S. propped up a broad swath of carriers post-911 and during COVID, we’ve never seen a Washington bailout designed for an individual airline. From Trump’s surprise salvo, things moved fast. By the next day, the Secretaries of Transportation and Commerce were reportedly mulling a $500 million package of loans in exchange for warrants that could give the U.S. a substantial equity stake in Spirit. The reports tagged Commerce chief Howard Lutnick as the chief proponent of the ownership strategy.
Spirit’s tailspin, of course, is partly of Trump’s making. The Middle East conflict has ignited an explosion in jet fuel prices, a line item that in average times amounts to 20% to 30% of airlines’ pre-tax, non-interest costs. Spirit’s been operating under bankruptcy protection since August, and just two weeks after the war began, presented an already-fragile reorganization plan in the Southern District of New York. The blueprint projected jet fuel in the $2.20 a gallon range for this year and 2027, and even at those historically low prices, foresaw super-thin operating margins of 0.5%. Now, airlines are paying around $4.20, almost double the pre-war sticker and Spirit’s forecast. A study by J.P. Morgan posits that due to the fuel hit, Spirit’s set to lose 20 cents for each dollar of revenue, and add $360 million in operating costs, an amount equal to its cash cushion.
It’s clear that Spirit can’t keep flying—unless Trump indeed orders a huge cash refill from the government. Clearly, keeping America’s leisure and business flyers as happy as possible under the circumstances is the best possible outcome for Trump. And that means maintaining the greatest possible frequency of service, and the best ticket prices considering the inevitable fuel surcharges. The problem: Salvaging Spirit is just a short-term fix that could do more harm than good. It would create subsidized competition for JetBlue and Frontier, potentially forcing those budget rivals, also stressed by the punishing fuel costs, into slashing flights to dodge a financial tailspin. That shrinking capacity could stoke higher fares and lengthen times between takeoffs, especially to prized vacation spots, that folks plan visiting this summer.
Let’s review at how Spirit got in so much trouble
Famed for its bright yellow planes, Spirit thrived during the 2010s by offering low-priced, no-frills service primarily to destinations in the Southeast and Caribbean. Then as now, it boasted strong presence in such metros as Orlando, Ft. Lauderdale, and destinations in the Caribbean, providing north-south service from New York, as well as Las Vegas, and surprisingly, Detroit. Around the turn of the decade, the player so reliant on low flying and overhead costs made some risky moves. In 2019, Spirit spent $10 to $11 billion on a fleet of brand new Airbus 320neo jets, and the following year broke ground on a sumptuous, 500,000 square foot campus on 12 acres in Dania Beach, Florida.
In early 2022, Spirit and Frontier—both pounded by COVID—announced merger plans to create a super ultra-low-cost carrier or ULCC. But months later JetBlue shattered the proposed union by capturing Spirit on a $3.7 billion, all-cash bid. The two then endured a long process seeking regulatory approvals over strong opposition from the Biden Administration. In January of 2024, a federal court sided with the DOJ and blocked the tie-up. That March, JetBlue and Spirt abandoned the quest. But its legacy badly damaged the target. “Spirit was in limbo for almost two years, where they didn’t make hard decisions,” says Savanthi Syth, an analyst at Raymond James. “They’d be in a better place today if they’d been able to spend less time without a direction and more time moving in the right direction.”
The upshot: In November of 2024, Spirit declared bankruptcy for the first time. It emerged in March of last year brandishing a new gameplan. It sold a number of its pricey new planes, relied far more on older models that it owned or leased, and drastically downsized its total fleet to just 76 planes. It also axed such far-flung destinations such as Oakland and San Diego to focus on core markets in Florida, New York and Detroit. Most of all, Spirit moved up-market. It remained a low-fare player, but positioned itself above the ULCCs by offering a number of perks including free wi-fi, extra legroom in premium cabins, and special check-in lanes. “They were moving into JetBlue territory,” observes Syth.
The plan failed, in part because Spirit had a reputation for mediocre customer service at best. “What they offered wasn’t enough to offset that historical brand deficit and get the extra revenue,” says Syth. Plus, big rivals Delta and United also offered low-priced options in their economy cabins, and won loyalty for their gracious treatment of flyers. Plus, United in particular targeted Spirit’s Florida strongholds deploying bigger planes and more flights.
In August of 2025, Spirit sought bankruptcy protection in New York court, for the second time in under two years. According to Syth, the reorganization plan was too optimistic from the start, and would have courted danger even if the war never happened. It relies on concessions from the unions that decline over time, and assumes that the premium strategy will work this time, greatly boosting revenues. “In addition, they’d gone with older airplanes, but they’d need to replace them at market rates. Overall, it seemed like a short term plan. And it couldn’t withstand the oil shock, which to be fair, no one back in January would imagine coming.” Citibank, which heads the lender group providing the revolving credit facility, states that Spirit’s already in default on part of the agreement, and skewers the airline for failing to show in the plan how it would perform if fuel prices remain elevated.
To make matters worse, if that’s possible, Spirit’s heading into the slow, pre-summer May season when the industry’s bookings and revenues fall. “Summer sales haven’t started and they’re in a lull period,” says Syth. “Even before the war, we thought it was highly likely they’d have to liquidate in the May timeframe.” She adds that a bailout would keep Spirit airborne, but “make the futures of JetBlue and Frontier more precarious.” And that, she says, could make things worse for the people Trump is trying to protect, the flying public.
As for a “redux” deal where either of those two rivals buy Spirit, it’s a long shot. Neither JetBlue nor Frontier harbor balance sheets strong enough to absorb the heavy debt baggage Spirit is carrying. For Syth, the best solution is the Administration to forget a bailout, and convince rival airlines to honor Spirit tickets on their own flights. Then, they’ll eagerly lease and purchase its planes in a super-tight market for jets, claim its routes and hire its pilots and flight attendants.
Losing a low-cost competitor is unfortunate, and would at least for awhile, increase concentration in a business where sundry routes offer just one or two competitors. But the best flight path is letting the market work.
This story was originally featured on Fortune.com