Trump administration in advanced talks for Spirit Airlines rescue package, sources say

The Trump administration is in advanced talks for a financing package for Spirit Airlines as the carrier is facing the risk of a liquidation, according to people familiar with the matter.

The deal could include $500 million in financing from the government, which could provide a path to give the government an equity stake in the carrier, said the people, who requested anonymity because they were not authorized to discuss the talks. The senior financing would put the government ahead of other stakeholders in the airline, one of the people said.

The iconic discounter Spirit has been challenged for years by rising costs, changing consumer tastes, an engine recall and a court-blocked plan to be acquired by JetBlue Airways two years ago.

“Spirit Airlines would be on a much firmer financial footing had the Biden administration not recklessly blocked the airline’s merger with JetBlue,” White House spokesman Kush Desai said in a statement to CNBC. “The Trump administration continues to monitor the situation and overall health of the U.S. aviation industry that millions of Americans rely on every day for essential travel and their livelihoods.”

Spirit had been facing a potentially imminent liquidation, people familiar with the matter told CNBC last week, speaking on the condition of anonymity to discuss matters that had not yet been made public. The Dania Beach, Florida-based carrier in August filed for its second Chapter 11 bankruptcy in less than a year, after it struggled to increase revenue to cover rising costs.

President Donald Trump hinted at potential government aid on Tuesday, telling CNBC’s “Squawk Box,” “Spirit’s in trouble, and I’d love somebody to buy Spirit. It’s 14,000 jobs, and maybe the federal government should help that one out.” 

The Wall Street Journal earlier reported that the talks were in an advanced stage.

“We are hopeful that the government will recognize the needs for emergency funds especially in the current economic environment,” a spokesperson for the Association of Flight Attendants-CWA, which represents Spirit’s cabin crews, said in a statement. “The last thing our economy needs is tens of thousands more people out of work and the last thing the travelling public needs is fewer choices in air travel.”

The final terms of the deal and what the airline receives could still change.

Spirit declined to comment on the talks.

“We are operating our business as normal; Guests can continue to book, travel and use tickets, credits and loyalty points as usual,” the airline said in a statement.

The U.S. airline industry accepted more than $50 billion in taxpayer aid to weather the Covid-19 pandemic, which is still its biggest-ever crisis, but those funds weren’t handed to one specific airline. Some of the aid gave the U.S. government stock warrants for airlines.