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Spirit Airlines is close to getting a $500 million bailout from the federal government, according to a source familiar with the negotiations.
The deal is expected to include the federal government taking a stake in the troubled airline, which had struggled to make money ever since the Covid pandemic.
Spirit would also avoid becoming the first significant US airline in 25 years forced to completely halt operations because of financial problems. Jet fuel costs have roughly doubled since the start of the war in Iran, derailing Spirit’s plans to emerge from its second bankruptcy reorganization since 2024.
The source told CNN a deal could be announced as soon as late Wednesday night or Thursday. It is designed to give the airline a chance to complete its reorganization.
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A shutdown would put thousands of Spirit employees out of work and leave millions of passengers with Spirit tickets scrambling to make other travel arrangements. It would also likely push up fares across the US airline industry.
But while a potential deal could be good for passengers and Spirit employees, it will likely cause backlash from the rest of the airline industry. All airlines are struggling with higher fuel costs, which is the second largest cost for airlines, behind labor.
Past bailouts of US airlines have also been done on an industry-wide basis, not in support of a single, relatively small carrier. Those previous bailouts were due to passengers being afraid to fly in the wake of terrorist attacks or during a pandemic, not because of high costs.
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Spirit declined to comment on a potential deal, telling CNN “we are operating our business as normal.”
The White House also declined to confirm the talks, but blamed the Biden administration blocking the airline’s merger with JetBlue for its poor financial footing.
“The Trump administration continues to monitor the situation and overall health of the US aviation industry that millions of Americans rely on every day for essential travel and their livelihoods,” White House spokesman Kush Desai said Wednesday.
Impact on fares
Spirit is a pioneer in offering ultra-low base fares in the US market. While that meant charging extra for things like carry-on bags, the model pushed fares lower for passengers across the US industry. It prompted larger airlines to offer cheap “basic economy” tickets.
Airfares are greatly determined by the supply of seats and the demand for travel on different routes. Removing even just the 2% of domestic US airline capacity Spirit is scheduled to fly this summer would reduce that supply and push fares up.
With strong bookings for summer travel coupled with worries about jet fuel costs, airlines have already had raised fares by 20% compared to a year ago.
Potentially even higher fares may give Spirit the leverage it needs to get government support.
Trump opens door to a deal
In an interview on CNBC Tuesday, President Donald Trump seemed to endorse the idea of financial support for Spirit in return for the government taking a stake.
“You know, Spirit’s in trouble, and I’d love somebody to buy Spirit,” he said. “It’s 14,000 jobs, and maybe the federal government should help that one out. And I told my people.”
Later Tuesday, Transportation Secretary Sean Duffy signaled the president directed him to take a look at such a deal.
“(When the) president says, ‘Take a look,’ and he is my boss, and so we will take a look,” he said.
However, there is already widespread opposition from the nation’s airline industry.
FAA Administrator Bryan Bedford, who was on stage with Duffy during his remarks, interjected that “they can’t have any of our money.”
United CEO Scott Kirby also denounced the idea of a Spirit bailout in a call with analysts Wednesday.
“Well-run airlines are still solidly profitable even in this environment, as you can see from United,” he said. “I don’t think this crisis anywhere near big enough to cause the need for (an) airline bailout.”
Kirby added that Spirit’s problems were well established even before 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 fuel spike),” he said.
‘Substantial doubt’ about its future
Spirit had 25,000 employees and contractors as of last August when it filed for Chapter 11 bankruptcy for the second time, which allows companies to reorganize themselves in the face of mounting losses.
Spirit was the eighth largest US airline in 2025 when ranked by the number of seats offered. But despite its size, it had warned repeatedly in recent years that there was “substantial doubt” about its ability to continue flying.
In late February, Spirit announced it had reached a deal with its creditors that would allow it to stay in business and emerge from its second bankruptcy as a smaller carrier without as much debt.
Just three days after that announcement, the war Iran started, sending oil futures and jet fuel prices soaring. Two weeks later, Spirit warned once again it was at risk of shutting down.
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