A Spirit Airlines plane at New York’s LaGuardia Airport.
Leslie Josephs/CNBC
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.
The company needs access to existing cash or new funding in the next few days to continue operations, said Marshall Huebner of Davis Polk, the airline’s lawyer.
“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.”
Spirit has been in “advanced” talks with Trump administration for financing that would keep the carrier afloat, Huebner said at a U.S. bankruptcy court hearing in New York. The iconic Florida discounter has been at risk of shutting down.
Huebner did not outline the plan in court, but people familiar with the matter have told CNBC that on the table is a $500 million loan that would give the government a potential stake of 90% of the Florida-based airline.
The potential deal has been shared with various creditor groups, according to the people, who requested anonymity because they were not authorized to discuss the talks.
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 jumped 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 standalone 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.
