The Trump administration is exploring whether to invoke the Defense Production Act to rescue Spirit Airlines, U.S. officials told CBS News, as bondholders weigh a federal term sheet that could go before a U.S. bankruptcy court as early as Monday.
The contemplated package would lend Spirit $500 million, vault the government to the front of the creditor line, and give taxpayers a warrant for a 90 percent stake in the Florida-based carrier when it emerges from Chapter 11, according to people familiar with the terms cited by CNBC and CBS News. It would mark one of the most direct federal interventions in a single private company in decades, as the U.S.-Iran war drives jet-fuel prices higher and pushes Spirit toward liquidation.
The term sheet
The Defense Production Act, typically used to compel companies to prioritize government contracts, also carries authority to lend to private firms for national defense. Under the structure described to CBS News, the Pentagon would tap Spirit's excess capacity to move troops and military cargo, and the airline would later be sold to another carrier. Commerce Secretary Howard Lutnick has pushed to proceed; Transportation Secretary Sean Duffy has argued against, warning the move could create a political problem and delay an inevitable failure, CBS News said.
Spirit's lawyer, Marshall Huebner of Davis Polk, told the bankruptcy court Thursday the loan would help the airline reach "standalone fighting shape" but could also set it up for a merger. Mike Stamer, an Akin attorney for bondholders, confirmed in court that "we did, in fact, receive a copy of the term sheet." President Trump told reporters Thursday: "We're thinking about doing it, helping them out, meaning bailing them out, or buying it."
Why now
Spirit has filed for bankruptcy twice in two years. It posted a nearly $28.3 million operating loss in February, before the U.S.-Israel strikes on Iran lifted fuel prices. May flights have fallen to 9,353 from 19,575 a year earlier, according to Cirium. A skipped interest payment surfaced at Thursday's hearing, putting Spirit into potential default on its debtor-in-possession agreement. Creditors have a seven-day window to act. The airline holds about $250 million in cash, but lenders have a lien on it. Spirit directly employs about 7,500 people. The Association of Flight Attendants-CWA called any push to liquidate "unnecessary and mean spirited."
The skeptics
Not every voice is sold on the rescue. Melius Research analyst Conor Cunningham questioned whether the sum would do the job. "$500 million is probably not enough," he told CNBC. Barclays' Brandon Oglenski wrote that a Spirit deal "could become a facility of last resort that other challenged carriers could seek in the future," raising the prospect of copycat requests from low-cost rivals that met with Duffy this week.
Today's body sources are CNBC and CBS News, both center to lean-left in framing; no right-leaning outlet's case against federal equity in a private carrier was available at press time. White House spokesman Kush Desai cautioned that any reporting on "the mechanism or structure of any deal" not officially unveiled "should be regarded as speculation."
A bankruptcy hearing on the term sheet could be set for Monday. Bondholders will signal within days whether they accept the government as senior creditor or force Spirit toward liquidation.