Spirit Airlines, already in the throes of its second bankruptcy in less than a year, is now teetering on the edge of complete liquidation as soon as this week, according to a Bloomberg report - with the US-Iran war's impact on jet fuel costs delivering what could be the carrier's fatal blow.
Rising fuel costs have muddied the American ultra low-cost airline's plan to repay its creditors by this summer, Bloomberg reported, citing sources familiar with the matter.
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The development has reignited speculation about a long-rumored merger with rival Frontier Airlines - Spirit's stiffest competition in the ultra-low-cost carrier market.
Spirit's financial distress, however, predates the Iran conflict by years. In 2022, Spirit had already accumulated a quantity of debt it was struggling to resolve before a possible merger, which was only exacerbated when a deal with JetBlue fell through in the spring of 2024. Without that lifeline, Spirit filed for Chapter 11 bankruptcy in November of that year.
It emerged by March 2025, only to file again by August amid worsening liquidity problems - a second collapse it has yet to recover from.
As per the report, Spirit CEO Dave Davis acknowledged the severity of the situation. "This is a true restructuring of the operations and profile of this business, when the first bankruptcy was not," he said of the pre-Iran War restructuring plan.
Now, creditors are pressuring the airline to cut losses and liquidate assets in an attempt to recoup at least a portion of what they're owed, and many are speculating this could be Frontier's opportunity to attempt to acquire Spirit for a fourth time.
Frontier has gone as far as offering three multi-billion dollar acquisitions of Spirit in 2022, 2024, and last year, the report said.
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Aviation observers remain skeptical about Frontier's appetite. "You could bid $1. That's not the issue. They have over $3 billion in debt that's just from borrowed money tied to their assets," wrote one Reddit user in an aviation forum.
Others, however, note that gates are a scarce resource and plane order backlogs at Boeing and Airbus are so long that Spirit's physical assets still carry real value.
Should Spirit and Frontier combine, they would become the fifth-largest carrier in the US. For now, Spirit says it "doesn't comment on rumors and speculation," leaving passengers and creditors alike in mounting uncertainty.
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