Spirit Airlines’ cash flow to stay afloat won’t last long and a government bailout package is on the table, a lawyer for the struggling budget carrier said at a hearing Thursday.
President Donald Trump later on Thursday at the White House told reporters: “We’re thinking about doing it, helping them, which means freeing them, or buying them.”
Trump told reporters that “if the price of oil goes down,” the government “can sell it for a profit.”
“I’d like to be able to save those jobs. I’d like to be able to save the airline. I like to have multiple airlines, so it’s competitive,” he said.
Marshall Huebner of Davis Polk, the airline’s attorney, did not reveal the proposed rescue plan during Thursday’s hearing, but people familiar with the matter told CNBC this week that a $500 million loan is on the table that would give the government a potential 90% stake in the Florida-based airline. They asked not to be identified because they are not authorized to discuss the speeches.
The deal would also allow the US government to appoint a board member, a person familiar with the terms may have told CNBC.
The White House and Spirit did not 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 improves competition and helps ensure that Americans continue to have access to affordable prices,” Spirit CEO Dave Davis said in an emailed statement.
The company needs access to existing cash or new financing in the next few days to continue operating, Huebner said Thursday.
“The money available from Spirit to fund ongoing operations will not last long,” he said. “So new financing, either new capital or access to about $240 million in restricted capital, is very important. Probably, within the next week.”
The airline was in danger of being shut down. A potential deal has been shared with various creditor groups, according to people familiar with the matter.
Spirit was expected to emerge from fundraising by the middle of the year, but rising fuel prices since the US and Israel attacked Iran have complicated those plans, the company said.
The discount airline has faced problems for years, including engine recalls, acquisitions by JetBlue Airlines that a federal judge blocked two years ago, changing customer preferences for higher market supply and cost overruns, even before gas prices rose this year.
“The wind is now at a crossroads,” Huebner said, with “several hundred million dollars” of the company’s cash “locked up and inaccessible” under the terms of the bankruptcy loan and other funds in separate tax and payment accounts.
Huebner said the additional funding will “create a worthy, powerful competitor in the airline space” as an independent carrier, “but also as the strongest player in what many believe should happen next, consolidation in the carrier space,” pointing to a possible merger.
