U.S. Nears Loan to Rescue Spirit Airlines

Spirit Airlines is in advanced talks to secure a loan of as much as $500 million from the Trump administration as part of last-minute efforts to avoid shutting down, two people familiar with the situation said Tuesday.

The move would be the latest in a series of government interventions in the private sector that President Trump has made in his second term. It could help prevent, or delay, the loss of thousands of jobs, but it will also raise questions about whether the government is spending money wisely. Spirit Airlines has been struggling for years and is in its second bankruptcy in two years.

The government’s loan would have a more senior claim to Spirit’s assets than loans the airline has taken from other creditors, the people said. The government would also receive the right to purchase a significant ownership stake in Spirit through financial instruments known as warrants, the people said on the condition of anonymity to discuss an ongoing deal.

The goal of the agreement is to give Spirit enough money to establish a sustainable business plan, the people said.

Mr. Trump previewed the rescue on Tuesday, saying in an interview on CNBC that “maybe the federal government should help” the company. He also said he would “love somebody to buy Spirit.”

The airline on Wednesday declined to comment on the possibility of receiving federal aid. “We are operating our business as normal,” Spirit said in a statement. “Guests can continue to book, travel and use tickets, credits and loyalty points as usual.”

In response to questions about the talks, a White House spokesman, Kush Desai, blamed Spirit’s problems on the Biden administration’s decision to block the airline’s merger with JetBlue Airways. “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,” he said.

The Wall Street Journal earlier reported on Spirit’s talks with the government.

Spirit’s prospects have been growing bleaker for years. Starting in the 2000s, the budget airline helped reshape American aviation by selling cheap tickets and charging fees for printed boarding passes and seat selection, among other perks. But it last made money in 2019 and has since lost billions of dollars.

Spirit had hoped to resolve its current bankruptcy case this year while continuing to operate, but the recent rise in fuel prices caused by the Iran war has threatened that plan.

The airline had struggled to recover from the pandemic amid intense competition. Spirit also wrestled with rising costs, the failed attempt to sell itself to JetBlue and engine defects that grounded many planes in its fleet for long stretches.

The transportation secretary, Sean Duffy, this week highlighted some of the challenges Spirit faced and discussed whether federal aid would be enough to put the company on a sustainable financial path.

“The question will be: Can we do anything to save Spirit and make it viable? Or would we be putting good money into a company that inevitably is going to be liquidated?” Mr. Duffy said in an interview with CBS that aired on Tuesday.

Over the past couple of years, Spirit’s business has shrunk a lot. It flew about 15,000 flights in March, down from about 29,000 two years earlier, according to Cirium, an aviation data firm. In a March securities filing, Spirit said it employed about 9,700 people last year, down from 11,900 the year before.

On Wednesday, the chief executive of United Airlines, Scott Kirby, expressed skepticism about the need for federal intervention and said Spirit was operating on a “fundamentally flawed” business model.

“The U.S. airline industry is on the most solid footing coming into this fuel price spike than we’ve been probably in my career,” he said on CNBC. “I think this would have to get a whole lot worse before there was need to start bailing out airlines.”

Karoun Demirjian contributed reporting.