Bankrupt discount carrier Spirit Airlines ceased operations yesterday, the industry’s first casualty linked to the Iran war, after failing to secure creditor support for a US government bailout plan.
The collapse 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.
No US carrier of Spirit’s size – it accounted for 5 per cent of US flights at one point – has liquidated in two decades. Spirit helped keep fares lower in markets where it competed against major carriers.
A Spirit board meeting had ended without an agreement to rescue the company, a person close to the discussions told Reuters late on Friday.
“Unfortunately, despite the company’s efforts, the recent material increase in oil prices and other pressures on the business have significantly impacted Spirit’s financial outlook,” Spirit said in a statement announcing “an orderly wind-down of operations.”
All flights have been canceled, the statement said, asking passengers not to go to the airport.
Major airlines and the US government scrambled to help stranded passengers and employees. The collapse will result in the loss of about 15,000 jobs of Spirit employees and contractors, the airline said.
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.
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. Global carriers are contending with surging jet fuel prices since the US-Israeli strikes on Iran disrupted traffic through the Strait of Hormuz, in the air travel industry’s worst crisis since the COVID-19 pandemic.
Spirit was already struggling to turn a profit before the fuel shock. 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 Airways and Frontier Airlines, also reeling from the cost shock. Spirit’s volatile over-the-counter stock plunged 25pc on Friday, while Frontier rose 10pc and JetBlue gained 4pc. In an early sign competitors were ready to fill the gap, JetBlue said it would expand its service from Fort Lauderdale, one of Spirit’s key markets, with 11 new cities and more flights on existing routes.
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 $500m financing package that would have helped the airline keep operating through bankruptcy.
Spirit’s collapse highlights the unintended consequences of the Iran war launched by Washington.
“More generally, the war’s spillovers, if not contained, risk pushing other fragile businesses over the edge and severely burdening vulnerable households and economies alike,” said Mohamed El Erian, economist and senior global fellow at the Wharton School. The collapse shows how the Iran war’s fuel-price shock has exposed weaker airlines. 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.
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