President Donald Trump said he would consider using federal authority to support bankrupt Spirit Airlines, a move that has sparked internal disagreement among his advisers and drawn criticism from fellow Republicans who oppose government ownership of private companies.
The White House is examining whether the Defense Production Act could be used to facilitate a $500 million loan to Spirit, which would give the government a warrant to acquire up to 90% of the airline after it emerges from bankruptcy. Pentagon officials have indicated they could use Spirit’s aircraft for military transport missions if the deal proceeds.
Spirit has filed for bankruptcy twice in the past two years, most recently after the Justice Department blocked its proposed merger with JetBlue during the Biden administration. The airline’s financial struggles have intensified due to rising jet fuel costs linked to regional conflicts, and it missed a critical interest payment that triggered a potential default under its debtor-in-possession agreement.
While Spirit holds approximately $250 million in cash, creditors have placed liens on those funds, limiting the airline’s access to liquidity. Creditors now have a seven-day window to initiate default proceedings, which Spirit’s legal team warns could leave the airline with only days to operate without external intervention.
The proposed arrangement would position the U.S. Government as Spirit’s primary creditor, with the loan secured by the airline’s assets. Administration officials say the structure aims to protect taxpayer interests while preserving jobs at the struggling carrier.
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Republican lawmakers have expressed concern that the initiative contradicts the party’s historical stance against government intervention in private markets, particularly the ownership of corporations. Some advisers within the administration have also questioned the wisdom of intervening in a single company’s bankruptcy.
Administration officials note that while the government has previously taken equity stakes in industries deemed vital to national security, rescuing a single airline through direct ownership would represent a significant departure from past practices.
The airline’s fleet has been significantly reduced, with flight operations declining from 19,575 flights in May of last year to 9,353 flights this May, reflecting broader challenges faced by low-cost carriers in a post-pandemic travel market shifting toward premium services.
What legal authority would the government use to support Spirit Airlines?
The administration is evaluating the use of the Defense Production Act, which grants the president authority to direct private industry to prioritize national defense needs and can include provisions for loan guarantees or direct lending in emergencies.
How would taxpayers be protected in the proposed deal?
The government’s loan would be secured by Spirit’s assets, which officials say exceed the loan amount, and would include a warrant allowing the government to acquire up to 90% ownership of the airline after bankruptcy proceedings conclude.
Why are some Republicans opposing the administration’s plan?
Critics argue the plan violates the Republican Party’s long-standing opposition to government ownership of private companies and represents an overreach of federal authority into corporate bankruptcy proceedings.
What happens if creditors reject the government’s proposal?
If creditors do not approve the terms, Spirit could face liquidation within days, as the missed payment has already placed the airline in a precarious position under its debtor-in-possession agreement.
