Airlines scramble to help stranded Spirit passengers after budget carrier collapses

WASHINGTON – Major airlines and the US government scrambled to help stranded passengers and employees after bankrupt discount carrier Spirit Airlines ceased operations on May 2, the industry’s first casualty linked to the Iran war.

The collapse overnight 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 US President Donald Trump, who proposed US$500 million (S$636.6 million) to save Spirit despite opposition from some of his closest advisers and many Republicans in Congress.

Spirit’s demise highlights the unintended consequences of the US-Israel war against Iran, despite an uneasy ceasefire.

While Spirit was already struggling to turn a profit before the fuel shock, global carriers are contending with surging jet fuel prices as Iran continues to halt nearly all traffic through the Strait of Hormuz and the US Navy blockades Iranian ports.

Transportation Secretary Sean Duffy told reporters that creditors rejected the deal despite intense efforts by the Trump administration to keep Spirit alive.

The collapse will result in the loss of about 15,000 jobs of Spirit employees and contractors, the airline said.

Some of Spirit’s largest creditors, including Mr Ken Griffin’s Citadel, a major hedge fund and one of the airline’s top bond holders, opposed the government-backed rescue, arguing the terms would dilute the value of their claims by placing federal financing ahead of existing debt.

Fond tributes

No US carrier of Spirit’s size – it accounted for 5 per cent of US flights in 2025 – has liquidated in two decades. Spirit helped keep fares lower in markets where it competed against major carriers.

On social media platform X early on May 2, where travellers often go to vent about delayed or cancelled flights, many sent nostalgic posts about the budget airline’s closure.

“Goodbye SpiritAirlines. Those of us in the ‘D’ (Detroit), or previously known as your Second Hub of #DTW, will miss ya,” said @IUTruthtellers2.

Others on X posted stories of their experiences flying on Spirit, including the hashtag “RIP” in their messages.

At Orlando International Airport, a digital departure display sign was filled with bright red notifications of cancelled Spirit flights that had destinations everywhere from Nashville to San Juan, Puerto Rico.

United Airlines, Delta Air Lines, JetBlue and Southwest are all capping ticket prices for Spirit customers who now need to rebook cancelled 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.

“This is the airline industry stepping up,” Mr Duffy said.

He noted that US low-cost carriers have sought US$2.5 billion in government aid to address higher fuel costs, but he did not think a government bailout was necessary “at this point”.

Airline collapsed overnight

Mr Duffy took a swipe at the administration of former US president Joe Biden, arguing that its blocking of a merger in 2024 between JetBlue and Spirit paved the way for the airline’s collapse.

Spirit filed for bankruptcy protection twice within a year and had not made a profit since 2019.

Spirit built its brand around affordable fares for budget-conscious travellers ready to eschew add-ons such as checked bags and seat assignments.

That demand tapered off after the Covid-19 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 and Frontier Airlines, also reeling from the cost shock.

Spirit had 4,119 domestic flights scheduled between May 1 and 15, offering 809,638 seats, according to data from aviation analytics firm Cirium.

Mr Trump said on May 1 that the White House gave Spirit and its creditors a final rescue proposal after talks hit an impasse over a US$500 million financing package that would have helped the airline keep operating through bankruptcy.

Spirit reached a deal with its lenders that would have helped it emerge from its second bankruptcy by late spring or early summer.

But the spike in jet fuel prices derailed those plans, upending Spirit’s cost projections and complicating its bankruptcy exit.

Spirit’s restructuring plan assumed jet fuel costs of about US$2.24 for 3.8 litres in 2026 and US$2.14 in 2027, but prices climbed to around US$4.51 for 3.8 litres 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.

The airline flew around 1.7 million US domestic passengers in February, with a 3.9 per cent market share, down from 5.1 per cent in 2025, Cirium data showed. REUTERS