By Brian Schwartz, Alison Sider and Alexander Gladstone
Spirit Airlines' time ran out Thursday evening.
In a 15-minute phone call, Commerce Secretary Howard Lutnick and Spirit Chief Executive Officer Dave Davis agreed that the budget carrier had run out of alternatives.
Davis, an industry executive picked to lead the airline about a year ago, thanked Lutnick for his efforts leading the rescue talks, people familiar with the discussions said, and the commerce secretary referred him to the Transportation Department for help in winding down the Florida airline.
The brief conversation, as recounted by people familiar with the matter, marked the end to a weekslong saga featuring negotiations between members of President Trump's inner circle, executives leading major U.S. airlines, and investment firms wrapped up in Spirit's bankruptcy.
The collapse of the effort spelled the final chapter for a company that helped pioneer the ultradiscount model in the U.S. Known for its bright-yellow planes with "Howdy" painted on the wing tips, Spirit was lauded for ratcheting up competition for travelers' dollars -- and reviled for levying charges on everything from water to printed boarding passes.
Spirit, which traces its roots to a Michigan trucking company founded in the 1960s, has been struggling for years. The company last turned a profit in 2019 and has been in and out and back into bankruptcy court over the past year and a half. Its challenges ranged from stiff competition from bigger carriers to a heavy debt load.
The onset of the Iran war in late February sent jet-fuel prices rushing higher, adding an extra $10 million to $15 million in expenses for Spirit each week and upending Spirit's plan to emerge from bankruptcy.
The airline had already been selling aircraft and scaling back its operations, and executives realized Spirit needed to do more, according to people familiar with their thinking. In mid-April, the company moved to get in touch with Lutnick.
An adviser worked to set up a meeting, while Davis, previously an executive at Minneapolis-based Sun Country Airlines, reached out to White House chief of staff Susie Wiles to convey what was at stake and the thousands of jobs that would be lost if Spirit went under. Wiles helped put Spirit on Lutnick's radar.
As Spirit started discussing the contours of a bailout with Trump administration officials, its creditors' concerns deepened, according to people close to the talks. They began considering alternatives including a potential liquidation, which would clear the way to sell off Spirit's planes and other assets.
With Lutnick spearheading the Trump administration's potential rescue effort, Spirit and the government closed in on a plan for a potential $500 million bailout that would in return give the U.S. a 90% stake in the company. Trump aired concern about thousands of jobs vanishing and said he hoped a buyer would emerge.
Eventually, Trump said, the government could sell Spirit for a profit when the price of oil came down. "I'd love to be able to save an airline, " he said on April 23, speaking in the Oval Office.
Transportation Secretary Sean Duffy, meanwhile, scoped the industry out for a possible partner for Spirit. JetBlue Airways -- which in 2022 struck a deal to buy Spirit for $3.8 billion, an agreement later blocked by a federal judge on antitrust grounds -- was contacted several times. American Airlines signaled it wasn't interested.
No buyer emerged.
Inside and outside the administration, pushback was growing. Airline executives including United Airlines CEO Scott Kirby argued to Duffy that Spirit should be allowed to fail. Industry officials argued that other airlines would recruit many of Spirit's employees.
Representatives of other airlines questioned whether Spirit would be viable even after a bailout, according to people familiar with the matter.
Duffy privately voiced concern to Trump about the political downside and expressed skepticism about what the government would get out of the deal. Other Republican leaders tried to warn the administration.
Lutnick, who had pushed for the Trump administration's investment last year in the chip maker Intel, counseled the president that saving thousands of jobs at Spirit could deliver a political win ahead of the midterm elections.
A group of bondholders, including Citadel LLC and Cyrus Capital, pushed back on the government's initial proposal because it would have relegated them to an inferior financial position.
The group presented a counterproposal that would have provided them with improved financial terms, people familiar with the matter said. It didn't get traction.
Spirit's bondholders determined that they would be better off with Spirit pursuing a liquidation of its aircraft fleet than agreeing to the government's terms, the people close to the talks said. The bondholders are expected to receive some recovery from proceeds of aircraft-liquidation sales.
In recent days, the Trump administration explored another novel approach to keeping Spirit flying: invoking the Defense Production Act, a Korean War-era law that enables the president to mobilize private industry to support national-defense efforts and respond to other emergencies, according to people familiar with the discussions.
Some national-security officials aired reservations, and the idea didn't proceed, the people said.
Bondholders sent a letter to Spirit's board members on Thursday evening encouraging them to pursue an orderly liquidation and wind down immediately as "the only responsible path," some of the people said.
The letter said that the bondholders, some of whom had provided Spirit with a bankruptcy loan, would release some of their cash to provide for employees' severance and healthcare costs.
On Friday, Trump weighed in again. He said the administration had given the company a "final proposal."
"If we could do it we'll do it, but only if it's a good deal," Trump said.
Spirit executives wanted to avoid shutting down on a busy day. Tuesdays, Wednesdays and Saturdays have the lightest schedules.
But they realized they didn't have enough cash to make it to Tuesday. Early Saturday morning Spirit notified its staff and parked its fleet of yellow planes.
Write to Brian Schwartz at brian.schwartz@wsj.com, Alison Sider at alison.sider@wsj.com and Alexander Gladstone at alexander.gladstone@wsj.com
(END) Dow Jones Newswires
May 02, 2026 02:49 ET (06:49 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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