Spirit Airlines Bailout Stalls, Threatens SoCal Flights

Negotiations over a $500 million government-backed bailout for Spirit Airlines collapsed this week after key bondholders rejected the proposed terms, sources familiar with the talks told CBS News. The deal would have loaned the funds in exchange for the federal government taking 90% control, positioning it as the senior bondholder ahead of others. Citadel, led by Ken Griffin, submitted a counterproposal that was turned down by the government, while Ares Management Corp. and Cyrus Capital also oppose the plan, two U.S. officials said. Spirit, which operates major hubs at Los Angeles International Airport (LAX) and Oakland International Airport (OAK), now has cash reserves to fly for only days, not weeks, risking an abrupt halt to California routes that serve millions of budget travelers annually.

The airline's woes stem from two bankruptcies since 2024 and soaring fuel costs tied to the Iran war, prompting Spirit to skip a recent interest payment and breach its debtor-in-possession agreement. A federal bankruptcy hearing originally set for Thursday in New York was postponed Wednesday amid ongoing bailout discussions, per a court filing. President Donald Trump signaled support on April 21 during a CNBC interview, hinting at a buyer or government aid to keep the carrier aloft. The White House confirmed the administration is monitoring the aviation sector's health and exploring options to protect passengers and workers.

California stands to lose big if Spirit folds: the carrier flies over 100 daily departures from LAX alone, connecting the state to budget destinations nationwide and supporting 2,000 local jobs. The Trump team is weighing the Defense Production Act to force through the loan, repurposing Spirit's excess capacity for military troop and cargo transport. As talks drag on, Spirit continues normal operations from Bay Area and Southern California airports, but time is running out for a resolution.