Spirit Airlines is preparing to shut down and liquidate its aircraft fleet after failing to secure a proposed $500 million lifeline from the U.S. government, people familiar with the matter told The Wall Street Journal. The ultra-low-cost carrier has been unable to garner sufficient support from bondholders and faced divisions within the Trump administration over the bailout terms.

The deal under discussion would have provided a cash infusion in exchange for warrants allowing the government to take up to a 90% stake in the company. Discussions advanced in late April, with reports on April 22 indicating the Trump administration was nearing agreement amid surging jet fuel prices triggered by tensions with Iran. However, key creditors, including Citadel, Ares Management Corp., and Cyrus Capital, opposed the plan, and a counterproposal from Citadel was rejected.

Spirit has endured relentless financial pressure. The airline has spent much of the past 18 months in Chapter 11 bankruptcy, its second filing since November 2024, following an August 2025 restructuring. Its pioneering model of rock-bottom fares paired with fees for nearly every service buckled under intensified competition, years of losses, and a heavy debt load. Rising fuel costs, which Spirit projected at $2.24 per gallon for 2026 in its turnaround plan, exacerbated the crisis.

The carrier holds about $250 million in cash, though much is subject to creditor liens, leaving funds for only days of operations. A bankruptcy hearing scheduled for Thursday was postponed as bailout talks continued, but momentum has evaporated. Flights remain on schedule for now, with the airline having leased most of its planes and planned to shrink its fleet to 76-80 aircraft.

Spirit's woes trace back to blocked mergers, including a $3.8 billion JetBlue deal halted by the Biden Justice Department on antitrust grounds. President Trump expressed openness to a government takeover 'for the right price,' citing valuable assets and jobs at stake, potentially numbering 7,500 employees. A White House official noted ongoing monitoring of the aviation sector.

Shares of Spirit Aviation Holdings, trading as FLYYQ, plunged as much as 74% on the news Friday. The potential shutdown marks a dramatic end for the once-disruptive carrier, with liquidation plans advancing absent alternative funding.