By David Shepardson and Laila Kearney
May 2 (Reuters) – Major airlines and the U.S. government scrambled to help stranded passengers and employees after bankrupt discount carrier Spirit Airlines ceased operations on Saturday, the industry’s first casualty linked to the Iran war.
The collapse overnight of the carrier following a doubling in jet fuel prices during the two-month-old Iran war will cost thousands of jobs. It is a blow to President Donald Trump, who had proposed $500 million to save Spirit despite opposition from some of his closest advisers and many Republicans in Congress.
Spirit’s demise highlights the unintended consequences of the U.S.-Israel war against Iran, despite an uneasy ceasefire. While Spirit was already struggling to turn a profit before the fuel shock, global carriers are contending with surging jet fuel prices as Iran continues to halt nearly all traffic through the Strait of Hormuz and the U.S. Navy blockades Iranian ports.
Transportation Secretary Sean Duffy told a news conference that creditors had rejected the deal despite intense efforts by the Trump administration to keep Spirit alive. The collapse will result in the loss of about 15,000 jobs of Spirit employees and contractors, the airline said.
Some of Spirit’s largest creditors, including Ken Griffin’s Citadel, a major hedge fund and one of the airline’s top bondholders, opposed the government‑backed rescue, arguing the terms would dilute the value of their claims by placing federal financing ahead of existing debt.
FOND TRIBUTES ON SOCIAL MEDIA
No U.S. carrier of Spirit’s size – it accounted for 5% of U.S. flights last year – has liquidated in two decades. Spirit helped keep fares lower in markets where it competed against major carriers.
On social media platform X on Saturday morning, where travelers often go to vent about delayed or canceled flights, many sent nostalgic posts about the budget airline’s closure.
“Goodbye SpiritAirlines. Those of us in the “D” (Detroit), or previously known as your Second Hub of #DTW, will miss ya,” said @IUTruthtellers2.
Others on X posted stories of their experiences flying on Spirit, including the hashtag “RIP” in their messages.
At the Orlando International Airport, a digital departure display sign was filled with bright red notifications of canceled Spirit flights that had destinations everywhere from Nashville to San Juan, Puerto Rico.
United Airlines , Delta Air Lines , JetBlue and Southwest are all capping ticket prices for Spirit customers who now need to rebook canceled flights and customers must provide a Spirit flight confirmation number to qualify. Rival airlines are also offering free seats to help Spirit employees get home.
“This is the airline industry stepping up,” Duffy said.
Duffy noted that U.S. low-cost carriers have sought $2.5 billion in government aid to address higher fuel costs, but he did not think a government bailout was necessary “at this point.”
AIRLINE COLLAPSED OVERNIGHT
Duffy took a swipe at the former administration of President Joe Biden, arguing that its blocking of a merger in 2024 between JetBlue and Spirit paved the way for the airline’s collapse. Spirit had filed for bankruptcy protection twice within a year and had not made a profit since 2019.
Spirit built its brand around affordable fares for budget-conscious travelers ready to eschew add-ons such as checked bags and seat assignments. That demand tapered off after the pandemic as passengers preferred to opt for comfort and experience-based travel, leaving ultra-low-cost carriers struggling to adapt.
Spirit’s shutdown will benefit rivals such as JetBlue and Frontier Airlines, also reeling from the cost shock. Spirit had 4,119 domestic flights scheduled between May 1 and May 15, offering 809,638 seats, according to data from aviation analytics firm Cirium.
Trump said on Friday that the White House had given Spirit and its creditors a final rescue proposal after talks hit an impasse over a $500 million financing package that would have helped the airline keep operating through bankruptcy.
Spirit had reached a deal with its lenders that would have helped it emerge from its second bankruptcy by late spring or early summer. But the spike in jet fuel prices derailed those plans, upending Spirit’s cost projections and complicating its bankruptcy exit.
Spirit’s restructuring plan assumed jet fuel costs of about $2.24 a gallon in 2026 and $2.14 in 2027, but prices had climbed to around $4.51 a gallon by the end of April, leaving the carrier unable to survive without fresh financing. Jet fuel accounts for about a quarter of airlines’ operating expenses.
The airline flew around 1.7 million U.S. domestic passengers in February, with a 3.9% market share, down from 5.1% last year, Cirium data showed.
(Reporting by David Shepardson, Sabrina Valle, Laila Kearney and Ismail Shakil, editing by Ross Colvin and Keith Weir)
