US airlines ‘collapse’ because of rising fuel prices

On May 2, the US low-cost airline Spirit Airlines announced an “orderly shutdown” due to running out of operating funds, canceling all flights, leaving passengers and employees stranded across the country, the Caribbean and Latin America.

CEO Dave Davis admitted that this was extremely disappointing and that no one expected it. “Staying in business requires hundreds of millions of dollars in additional cash that Spirit simply does not have and cannot have,” he said.

According to data from aviation analytics firm Cirium, Spirit has 4,119 scheduled domestic flights from May 1 to 15, offering 809,638 seats. By May 3, the airline said it had almost completed refunding passengers and returning the crew to headquarters.

Reuters said that Spirit Airlines was “the first victim of the aviation industry” related to the Middle East conflict that caused aviation fuel prices to double. The World commented that the energy crisis had “dealt the final blow” to a company that was already financially weakened by Covid, having twice filed for bankruptcy to restructure under Chapter 11.

Just at the beginning of the summer, Spirit had just reached an agreement with creditors, helping to escape bankruptcy for the second time. However, skyrocketing jet fuel prices extinguished hopes. In the restructuring plan, the company assumed fuel prices of about $2.24 per gallon this year and $2.14 per gallon in 2027.

But fighting in the Gulf caused real prices to rise to $4.51 per gallon at the end of April, forcing the company to find new financing if it wanted to continue operating. Spirit’s board of directors convened a meeting on May 1 but no rescue agreement was reached, leading to the decision to cease operations.

“Unfortunately, despite the company’s efforts, the recent sharp increase in oil prices and other pressures on the business have significantly impacted Spirit’s financial outlook,” the airline said in a statement.

Spirit was founded in Michigan in 1964, initially as a long-distance transportation company. In the 1980s, they moved into the aviation field under the name Charter One Airlines, serving resort travel packages. The company changed its name to Spirit in 1992, specializing in exploiting the low-cost segment and operating effectively for a period of time.

At its peak, Spirit was among the top 10 US airlines, transporting 40 million passengers a year. Just before Covid-19, the company bought about 100 new Airbus aircraft and planned to buy nearly 300 more by 2027. But within just a few years, everything collapsed because of the pandemic.

In 2023, Spirit was almost saved, through a proposed acquisition by rival JetBlue. The deal was almost completed, but was ultimately blocked by antitrust authorities under President Joe Biden. On Fox Business Network’s “Sunday Morning Futures” program on May 3, Treasury Secretary Scott Bessent blamed the Biden administration for Spirit’s closure.

Unable to manage on their own, the company filed for bankruptcy for the first time in 2024. After prior restructuring, they reduced debt by 795 million USD by converting into shares, and received 350 million USD in equity from existing investors.

However, by the end of August 2025, Spirit Airlines again filed for bankruptcy protection, due to not being able to overcome the ballooning cost structure during the first bankruptcy. Meanwhile, tourism spending in the US has declined because of trade policies and budget cuts under President Trump.

According to Cirium data, Spirit carried about 1.7 million domestic passengers in the US in February, with a market share of 3.9%, down from 5.1% last year. In recent weeks, information has spread that Spirit is about to stop operating.

President Donald Trump said his administration was considering a rescue, but it had to be “a good deal.” “If we can help them, we will, but we have to come first,” Mr. Trump said. By the end of last week, the government proposed a $500 million bailout package, but Spirit’s creditors objected, saying this could reduce the value of their investments. Therefore, the Spirit board meeting ended on May 1 in a dead end.

Theo The Worldrather than looking to revive the brand, shareholders are apparently looking forward to selling off assets, as the company is said to still have around 100 aircraft. This is also the idea of ​​Transport Minister Sean Duffy. “They are making heavy losses and this has been planned for a long time. They will have to liquidate assets,” Mr. Duffy commented May 3 on ABC’s “This Week” program.

To assist passengers whose flights were unexpectedly canceled, other US airlines agreed to accept Spirit tickets, for an additional fee. Frontier, JetBlue and Southwest sell discounted tickets to help stranded passengers and plan to add new routes in the summer. Delta and American Airlines are also offering temporarily lower fares to Spirit passengers.

Faced with high fuel prices, the American Low-Cost Airlines Association proposed a warrant exchange package that could be converted into shares to receive $2.5 billion in federal support. The money will be used specifically to offset increased fuel costs, as “a necessary and targeted measure to stabilize operations and keep airfares at reasonable levels during a period of volatility.”

The association also proposed that Congress suspend the 7.5% federal excise tax on airline tickets and the $5.30 per flight tax, to offset about a third of escalating costs due to rising fuel prices.

Commenting on the proposal on May 1, Transport Minister Sean Duffy said he did not see the need to provide relief because airlines are better at raising money on the private market. “At this point, I don’t think it’s necessary. They have enough cash. If they want to go to the government, we will be the lender of last resort,” he said.