preparing to shut down<\/a>.<\/p>\nIt was not immediately clear when the company would stop flying and what an end to operations would mean for Spirit\u2019s customers. In the past, other airlines have offered free or discounted tickets to travelers stranded by companies that abruptly shut down.<\/p>\n
American Airlines said in a statement on Friday that it was \u201cprepared to do all it can\u201d to help affected travelers and Spirit\u2019s employees. American said it had capped prices for tickets in its main economy cabin on some routes on which both American and Spirit operate flights.<\/p>\n
Over the past couple of years, Spirit\u2019s footprint had shrunk a lot. It had about 12,000 scheduled flights in April, down from about 25,000 two years earlier, according to Cirium, an aviation data firm.<\/p>\n
Spirit last reported an annual profit in 2019 and has lost several billion dollars since then. The airline had struggled to recover from the pandemic amid intense competition in its biggest markets. Spirit also wrestled with rising costs, a failed attempt to sell itself to JetBlue Airways and engine defects that grounded many planes in its fleet for long stretches.<\/p>\n
But many aviation experts said it was hard to see how Spirit could survive even with a federal bailout. Some administration officials expressed similar concerns.<\/p>\n
\u201cThe question will be: Can we do anything to save Spirit and make it viable?\u201d the transportation secretary, Sean Duffy, said in an interview with CBS last month. \u201cOr would we be putting good money into a company that inevitably is going to be liquidated?\u201d<\/p>\n
In an interview this week, Scott Kirby, the chief executive of United Airlines, said Spirit\u2019s problems predated the current rise in fuel prices since the war in Iran began on Feb. 28. \u201cThey were in trouble well before this, and well-run airlines are able to be profitable even in this environment,\u201d he said.<\/p>\n
At one point, budget airlines like Spirit generated huge profits, earning more per dollar of sales than larger airlines like United, but Mr. Kirby said their business model was flawed because it was based on treating customers poorly by, among other things, charging lots of fees.<\/p>\n
The proposed federal bailout for Spirit faced resistance from investors in part because the Trump administration had demanded that the government have the first claim to Spirit\u2019s assets if the airline ultimately failed. That would have left other investors that had lent money to the airline with little or nothing.<\/p>\n
The investors that objected most strongly to the bailout were the firms that made Spirit what is known as a debtor-in-possession loan, and include Citadel, Cyrus Capital and PIMCO. Such financing allows distressed companies to keep going while they resolve their financial problems in bankruptcy court. These debts have high interest rates, and the investors who own them are paid back before other creditors. The investors also have the right to object to changes, including new loans, that could hurt their interests.<\/p>\n
Robert Lawless, a professor of bankruptcy law at the University of Illinois Urbana-Champaign, compared the rights of these lenders to an oft-cited metaphor of hikers standing on a hill. \u201cThe new lender says, \u2018We\u2019re on this mountain trail, and there\u2019s plenty of room for you to go out and stand out there closer to the edge of the cliff,\u2019\u201d Mr. Lawless said. \u201cAnd the existing lender has a good response, which is that if there\u2019s so much room, why don\u2019t you go stand out there?\u201d<\/p>\n
The lenders, which also thought the government\u2019s proposal could favor the interests of Spirit\u2019s executives over theirs, had put forward their own counterproposal that would have the government lend on better terms, the people familiar with the situation said.<\/p>\n
In a Thursday letter to Spirit Airlines, the creditors said they did not see how the company could survive and urged Spirit\u2019s board to begin winding down its business, according to a copy reviewed by The New York Times.<\/p>\n
\u201cThe time has come for the board to recognize this regrettable reality and promptly commence the necessary process to protect the estate, its employees and its customers \u2014 including those to whom tickets continue to be sold,\u201d the letter said.<\/p>\n
The creditors, noting that they had obligations to their own investors, said they had reached this decision \u201conly after the U.S. government mounted an extraordinary, sustained and highly resourceful effort to save Spirit.\u201d They also offered to help Spirit\u2019s employees with health care costs as part of the company\u2019s liquidation.<\/p>\n
Talking to reporters on Friday outside the White House, Mr. Trump implied that any terms that did not put the government first were unacceptable.<\/p>\n
After the Trump administration began talks with Spirit, other budget airlines asked the federal government for assistance, too. In a letter this week, a trade group representing those carriers requested a $2.5 billion \u201cliquidity pool\u201d<\/a> to help offset higher fuel prices.<\/p>\n","protected":false},"excerpt":{"rendered":"Spirit Airlines is preparing to shut down as early as 3 a.m. on Saturday after failing to strike…\n","protected":false},"author":2,"featured_media":217272,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[83816,66625,85649,81885,62398,83817,5292,85648,81117,58362,9,11,10,5007,5291,81884,901],"class_list":["post-217271","post","type-post","status-publish","format-standard","has-post-thumbnail","category-new-york","tag-acquisitions-and-divestitures","tag-airlines-and-airplanes","tag-baldanza","tag-bankruptcies","tag-ben","tag-discount-selling","tag-fees-and-rates","tag-indigo-partners-llc","tag-jetblue-airways-corporation","tag-mergers","tag-new-york","tag-new-york-headlines","tag-new-york-news","tag-oil-petroleum-and-gasoline","tag-prices-fares","tag-spirit-airlines","tag-united-states"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/posts\/217271","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/comments?post=217271"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/posts\/217271\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/media\/217272"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/media?parent=217271"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/categories?post=217271"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/tags?post=217271"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}