By David Shepardson
WASHINGTON, April 23 (Reuters) – A lawyer for Spirit Airlines confirmed on Thursday the bankrupt carrier is in advanced discussions with the federal government on terms of financing to help the airline restructure.
Marshall Huebner, an outside lawyer for Spirit, said at a bankruptcy court hearing in New York that details of the proposed financing offered by the Trump administration have been shared with its primary creditor groups.
“The financing offered to us by the federal government would do far more than make this reorganization possible. It would create an appropriately capitalized, fierce competitor in the airline space,” Huebner said, emphasizing talks are continuing. “I think it’s far too early for anybody to know where this is going.”
He added the deal would also potentially make Spirit “the strongest player in what so many believe must happen next – consolidation in the value carrier space to create one or maybe two scaled national carriers that can truly compete and lower airfare for millions of Americans for decades to come.”
FINANCING LIKELY TO BE A LOAN
Reuters and other outlets reported on Wednesday the Trump administration was nearing a deal to rescue the ultra-low-cost carrier, offering about $500 million in government-backed financing to help it exit bankruptcy.
The financing would likely be a loan to keep Spirit running during bankruptcy, which would later become a longer-term loan when the airline exits bankruptcy. Warrants would give the U.S. government a potential stake of up to 90%, the sources said.
Huebner declined to disclose terms of the discussed deal, which underscores one of the unintended consequences of the U.S.-Israeli war with Iran: a surge in jet fuel prices that has pushed weaker airlines closer to the brink. He said higher fuel prices had cost Spirit $100 million since the start of the war.
He also warned the liquidation of Spirit would eliminate the carrier’s over 17,000 jobs and generate billions of dollars in claims, and said the company needs new financing or access to $240 million of its funds by the end of next week.
“The cash actually available to Spirit to fund ongoing operations is not going to last for very much longer.”
A judge may hold a hearing next week on the government financing.
Spirit Airlines pilots represented by the Air Line Pilots Association said in a statement they back the proposed government support.
“Federal relief is not a handout,” said Ryan Muller, chair of the local union representing Spirit pilots. “It is a loan that will allow the airline to finish the work that is already well underway, and it is the right call for 14,000 workers, nearly 2,000 pilots, the families who depend on those paychecks, and the millions of passengers who rely on affordable air travel.”
However, the prospect of federal funding for Spirit worries other U.S. carriers that are also wrestling with higher fuel costs and have quietly expressed reservations, one senior airline industry source said.
Support for Spirit has also divided members of Trump’s administration and Republican lawmakers.
U.S. President Donald Trump told CNBC on Tuesday that he would prefer to see Spirit acquired, but said government involvement was possible.
Transportation Secretary Sean Duffy and some lawmakers have raised concerns about a potential bailout of Spirit, questioning if it can succeed. Duffy said this week that no one wants to buy Spirit Airlines. “If no one else wants to buy them, why would we buy them?” Duffy asked.
(Reporting by David Shepardson. Additional reporting by Allison Lampert in Montreal; Editing by Aurora Ellis, Rod Nickel)
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