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A lawyer for Spirit Airlines said Tuesday that the surge in jet fuel prices left the company with “no remaining way out” of bankruptcy and caused it to cease operations last weekend, while it seeks permission to sell assets on an ongoing basis and pay bonuses to remaining employees.
Marshall Huebner, a lawyer representing the airline, said at a bankruptcy court hearing that Spirit learned last Thursday that a proposed $500 million bailout from the Trump administration wouldn’t proceed due to the objections of some of the airline’s creditors.
Huebner apologized to customers and the American public on behalf of the airline and said that Spirit continued to operate on Friday, transporting 50,000 passengers, as it sought to wind down operations before making the news public.
Earlier this year, Spirit announced a plan to exit its second bankruptcy, but the plan’s assumptions about the costs the airline would face were upended by the outbreak of the Iran war, which sent oil prices surging and ultimately pushed jet fuel prices beyond what it could manage.
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Spirit had been struggling to turn a profit before the fuel shock and has faced $100 million in fuel costs since March 1. Huebner noted that Spirit faced many hundreds of millions of dollars in high fuel costs over the rest of the year if it were to continue to operate.
The company is seeking approval from the court to pay $10.7 million in retention bonuses to employees who remain with Spirit while it winds down its operations.
The bonuses average $76,000 per participant and the request would see the top three executives paid more, though that amount was undisclosed. The U.S. Trustee, which is the Justice Department’s bankruptcy watchdog, raised concerns about the bonuses.
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Spirit also raised concerns that it doesn’t have the funds to conduct an organized auction of its aircraft, engines and other equipment – so it’s seeking court permission to conduct fast sales or to abandon the equipment to allow the lenders to repossess.
The airline ceased operations on Saturday, canceling all flights as it began winding down operations “effective immediately.”
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The company said that customers who booked flights directly with Spirit with their credit or debit card would automatically be refunded to their original form of payment.
Most of those refunds were processed as of Saturday evening, though some may take additional time to process and appear in customer’s accounts.
Travelers who bought tickets through third-party vendors, such as travel agencies, will need to reach out to those providers to request refunds, according to the airline.
Passengers who used vouchers, travel credits or loyalty points to book face more uncertainty, as those claims will be handled through Spirit’s bankruptcy process, with more details on the airline’s restructuring website.
FOX Business’ Sophia Compton and Reuters contributed to this report.
