Spirit Airlines in advanced talks for federal financing, lawyer says

By David Shepardson and Allison Lampert

WASHINGTON, April 23 (Reuters) – Spirit Airlines is in advanced discussions with the federal government over financing to help it restructure as it faces a cash crunch as early as next week, a lawyer for the carrier told a New York bankruptcy court hearing on Thursday.

Details of the proposed financing offered by the Trump administration were shared with Spirit’s primary creditor groups, said Marshall Huebner, an outside lawyer for the bankrupt carrier.

U.S. President Donald Trump said on Thursday his administration was looking at buying the embattled airline at the “right price.” “When the price of oil goes down, we would sell it for a profit,” he told reporters at the White House.

Publications including Reuters reported on Wednesday that the 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, a prospect supported by unions representing airline workers as well.

“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,” said Huebner, who cautioned that talks are still continuing. “I think it’s far too early for anybody to know where this is going.”

The Florida-based budget carrier is running short on time. Huebner said Spirit needs new financing or access to $240 million of its funds by the end of next week. The liquidation of Spirit would eliminate more than 17,000 jobs and generate billions of dollars in claims.

“The cash actually available to Spirit to fund ongoing operations is not going to last for very much longer,” he said.

While a deal would keep Spirit afloat at a time when higher fuel prices eat into carriers’ profits, the prospect of a U.S. government-funded bailout has led to pushback from within the airline industry and among members of Trump’s Republican party.

Huebner said a deal could make Spirit the strongest player in the discount air carrier market, which needs consolidation to arrive at “one or maybe two scaled national carriers that can truly compete and lower airfare for millions of Americans for decades to come.”

RISING JET FUEL PRICES

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.

He did say that higher fuel prices had cost Spirit $100 million since the start of the war, one of many carriers feeling the brunt of the U.S.-Israeli war with Iran that has caused jet fuel prices to surge, pushing weaker airlines closer to the brink.

A judge may hold a hearing next week on the government financing.

Spirit Airlines pilots and flight attendants pleaded on Thursday for government assistance. 

“Other airline executives are saying Spirit won’t survive no matter what the federal government does. But that isn’t true. Spirit’s competitors are just saying this because they want to gobble up Spirit’s parts without any obligation to the frontline employees who need these jobs to survive,” said Sara Nelson, president of the Association of Flight Attendants-CWA which represents Spirit cabin crew.

“Federal relief is not a handout,” added Ryan Muller, chair of the local union representing Spirit pilots, in a statement.

OTHER CARRIERS RAISE CONCERNS

Other U.S. carriers also dealing with higher fuel costs have already expressed reservations to the government over a potential Spirit bailout, one senior airline industry source told Reuters.

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, questioning its likelihood of success if competitors do not want to acquire the struggling carrier.

“If no one else wants ⁠to buy them, why would we buy them?” Duffy said this week.

(Reporting by David Shepardson and Allison Lampert in Montreal; Editing by Aurora Ellis, Rod Nickel and David Gaffen)