Spirit Airlines’ accessible cash to keep operating won’t last long and a government rescue package is on the table, a lawyer for the struggling budget carrier said at a hearing Thursday.
President Donald Trump later Thursday at the White House told reporters: “We’re thinking about doing it, helping them out, meaning bailing them out, or buying it.”
Trump told reporters that “when the price of oil goes down,” the government could “sell it for a profit.”
“I’d love to be able to save those jobs. I’d love to be able to save an airline. I like having a lot of airlines, so it’s competitive,” he said.
Marshall Huebner of Davis Polk, the airline’s lawyer, did not outline the proposed rescue plan at the Thursday bankruptcy hearing, but people familiar with the matter told CNBC this week that on the table is a $500 million loan that could give the government a potential stake of 90% of the Florida-based airline. They requested anonymity because they were not authorized to discuss the talks.
The deal would also allow the U.S. government to select a board member, a person familiar with the potential terms told CNBC.
The White House and Spirit didn’t respond to a request for comment about the board seat.
“We are grateful for President Trump’s support and look forward to continuing to work with him and his Administration on a solution that protects thousands of jobs, preserves and enhances competition and helps ensure Americans continue to have access to affordable fares,” Spirit’s CEO Dave Davis said in an emailed statement
The company needs access to existing cash or new funding in the next few days to continue operations, Huebner said Thursday.
“The cash actually available to Spirit to fund ongoing operations is not going to last for very much longer,” he said. “So either new financing, either or both of new financing or access to almost $240 million of restricted cash, is absolutely essential. Round about, no later than the end of next week.”
The airline has been at risk of shutting down. The potential deal has been shared with various creditor groups, according to the people familiar with the matter.
Spirit had expected to emerge from bankruptcy midyear, but a surge in fuel prices since the U.S. and Israel attacked Iran has complicated those plans, the company has said.
The iconic discount airline has faced troubles for years, including an engine recall, an acquisition by JetBlue Airways that a federal judge blocked two years ago, shifting customer preferences for more upmarket offerings and a jump in costs, even before fuel prices surged this year.
“Spirit now definitively stands at the crossroads,” Huebner said, with “several hundred million dollars” of the company’s cash “locked away and inaccessible” under bankruptcy loan terms while other funds are in separate accounts for payroll and tax payments.
Huebner said the additional financing would “create an appropriately capitalized, fierce competitor in the airline space” as a stand-alone carrier, “but also potentially as the strongest player in what so many believe must happen next, consolidation in the value carrier space,” hinting at a potential merger.