Spirit, the troubled and twice-bankrupt budget airline, could liquidate as early as this week, according to reports from Bloomberg and CNBC.
The company has been struggling financially for some time now and filed for its second chapter 11 bankruptcy back in October. According to a Wall Street Journal report, Spirit had reached an agreement with creditors earlier this year that would help it reemerge from that second bankruptcy by this summer.
But then, American and Israeli bombs began falling on Iran on February 28. In retaliation, Tehran promptly closed virtually all traffic through the Strait of Hormuz, a critical oil chokepoint, resulting in the disruption of the global energy trade and creating a jet fuel shortage.
It’s “the largest energy crisis we have ever faced,” according to International Energy Agency executive director Fatih Birol, who told the Associated Press that Europe could run out of jet fuel in six weeks. If the situation keeps continuing as is, Birol said flight cancellations could start mounting.
“In the past, there was a group called ‘Dire Straits.’ It’s a dire strait now, and it is going to have major implications for the global economy,” Birol told the AP on Thursday. “And the longer it goes, the worse it will be for the economic growth and inflation around the world.”
The situation at Hormuz is only getting more complicated. Earlier this week, President Trump began a naval blockade of the strait, as retaliation for Iran’s retaliation.
To be fair, Spirit has been struggling long before Hormuz shut down. Ever since the pandemic disrupted the air travel industry. The budget airline sought to be acquired by JetBlue back in 2024, but it was deemed anticompetitive and blocked by a federal judge, and the merger fell through. Later that year, Spirit filed for its first Chapter 11 bankruptcy.
But the rising fuel prices are hard to ignore. If jet fuel remains expensive throughout this year, as normalization could take months after Hormuz reopens, it could cost Spirit $360 million, according to JPMorgan analysts cited by the WSJ.
Meanwhile, Birol’s dire warning has already started to manifest. Ticket prices are soaring worldwide, and cancellations are mounting. Last month, reports claimed that Spirit would slash a lot of its routes, both international and domestic, starting mid-April. As of this week, Spirit began cancelling pre-booked flights and seemingly dropping some of the routes mentioned in March reports, such as its route from Newark to Savannah.
Spirit is not alone in this trend; it’s affecting other budget airlines too. Airlines that service a wealthier clientele are also getting hit by the jet fuel price increase, but can afford to raise fares and limit cancellations to a bare minimum, as their customers are relatively more immune to the rising costs.
But budget airlines like Spirit are opting to cancel routes altogether. Low-cost transatlantic flight operator Norse Atlantic Airways said on Thursday that it was cutting its service to Los Angeles this summer. Meanwhile, South Korean budget airline T’way Air is reportedly planning to furlough some of its cabin crew next month to help address the cost of fuel.
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