Beleaguered ultra-low-cost carrier Spirit Airlines could have little more than a few hours of cash left and might be forced to ground flights forever by the end of Friday, as crunch talks with creditors and shareholders come to a head, amidst a stalled federal bailout.
For now, at least, the Florida-based carrier is still flying. Planes remain in the sky, check-in desks at airports across the country are open, and Spirit is still taking money from new ticket sales.
The situation could, however, change incredibly rapidly. The first signs that something is amiss could be Spirit requesting the Federal Aviation Administration (FAA) to enforce a nationwide ground stop, while news is filtered through the employees.
While the aviation industry looks on nervously to see whether Spirit can survive to fly another day, the airline remains suspiciously silent after the Wall Street Journal broke the news that creditors were close to pulling the plug and cutting their losses.
Of course, we have been here before. Spirit is in the midst of its second Chapter 11 bankruptcy process, and this second time around has been particularly difficult, with the airline swinging back after sources incorrectly suggested the carrier was on the verge of liquidation.
But something feels very different on this occasion. Until only recently, Spirit had been talking up the very real possibility of it exiting Chapter 11 bankruptcy by this Spring. That all fell apart, however, when jet fuel prices skyrocketed following joint US and Israeli military action in Iran.
Spirit’s financial assumptions for exiting bankruptcy and becoming profitable never took into account the massive shock it has faced from surging fuel prices, which are now around double what they were before the Iran War.
In a last-ditch attempt to avoid liquidation, Spirit reached out to the Trump administration: Give us a multi-billion-dollar bailout in return for a stake in the airline.
President Trump was receptive to the idea, but talks have stalled. The sticking points are the stake that the federal government would take in Spirit should it fund a bailout and the terms relating to the airline’s large private investors and creditors.
With the two sides at loggerheads, Spirit’s creditors have a tough call to make: pump even more cash into Spirit in the hope that a bailout deal can be brokered that meets their needs, or cut their losses and allow Spirit to fail.
The latter would certainly be a boon for rival airlines, especially those with deep pockets that can not only weather the current jet fuel price increases with relative ease, but also have enough spare cash to start shopping Spirit’s assets.
