R.I.P. Spirit Airlines

0:05Alison, is Spirit Airlines dead? Yes, Spirit Airlines is dead. It has been a long multi-year saga, but it has shut down. All flights are canceled. There is no more Spirit Airlines. Our colleague Alison Sider covers the airline industry. So what was the time of death? Its last flight was flight 1833 from Detroit to Dallas. I think it landed a little bit after midnight central time on Saturday. That's like the last thing I'm kind of seeing on here. So you might be the last one. Yeah, I guess it was this. Probably the last revenue flight. This is it tonight. Well, it was a pleasure working with you guys, and I wish you the best.

0:51And Allison, what was the cause of death? Oh, my God. I don't even know where to start. Like, you could pinpoint the cause of death at so many different points. I mean, the immediate cause of death was the rapid, sustained rise in fuel prices due to the Iran war. But that's like if someone has a heart attack, but they had, like, years of damage, coronary damage, you know, that was just, like, waiting for that one moment. It was fuel prices in the end, but it was a really long, drawn-out, slow demise. up until that point.

1:30Ultimately, it will leave consumers with one less choice, and there will be one less airline kind of providing that competition. So, you know, ultimately, even if you hated Sphere and it never flew it and it drove you crazy, like, ultimately, it will affect you.

1:49Welcome to The Journal, our show about money, business, and power. I'm Jessica Mendoza. It's Monday, May 4th.

2:02Coming up on the show, rest in peace, Spirit Airlines.

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3:16Spirit Airlines became the name in ultra-low-cost flying in 2006. There had been budget travel in the U.S. before. You know, other airlines charged low fares. But Spirit really revolutionized this idea of, they were called an ultra-low-cost carrier, and they offered, like, really cheap flights. On Spirit, you could get a one-way ticket for around$50. sometimes even less. And then everything else was an optional fee. And I mean, that was like no water on the plane, you know, checked bags, carry-on bags, printing out a boarding pass at the airport, like every single extra thing you wanted was going to cost you.

3:55And people kind of hated that in some ways because obviously it's very annoying to be nickel and dimed like that. Yeah, you're like, I just want water. Do I really have to pay for it? You can just give me a cup? This was the feeling, I feel like. Right. When Spirit was sort of embracing this business model for the first time, people were like, it was very jarring, you know? People didn't love it. But they did love low fares. And people liked cheap travel. And Spirit appealed to customers who maybe weren't deciding between Spirit or Delta. They were deciding between Flying Spirit and not going anywhere at all, or Flying Spirit and driving.

4:28So it did bring air travel to a lot of people who might have not otherwise been flying. For a while, the low fare model worked. Spirit Airlines grew really quickly. Soon, other airlines also started offering low-cost options and charging fees for other services. It challenged a lot of the big airlines, you know, went head-to-head with them and some of their big hubs. And the bigger airlines ended up embracing a lot of Spirit's practices. And there's other airlines that have kind of imitated it, you know, that have adopted the same model. So, you know, it really changed a lot of things about flying.

5:09When did this model, this sort of like ultra discount model, begin to stop working? I mean, I think we really saw after the pandemic, these budget airlines never really recovered. So, I mean, Spirit hasn't made money since 2019. Coming out of the pandemic, people's preferences seem to change. There was this sort of new enthusiasm for kind of like a more comfortable flying experience. People, you know, during the pandemic had stockpiled like tons of points. And, you know, we're suddenly we're sort of able to fly maybe extra legroom or even business class or to be in a lounge. Premium economy. Yeah, and they didn't want to go back.

5:52And that's not really, you know, Spirit did have the big front seat, which is kind of their answer to that. And people used to think it was like the best deal in air travel. But they didn't have like a real answer to premium economy. Did Spirit try to adjust in light of all these changes? Spirit sort of debuted its own offerings, you know, its own kind of answer to the premium travel trends. Spirit took a page from the big airlines playbook. It started offering roomier seats and unlimited drinks and snacks for a higher price. So even as the full-priced carriers were making changes in response to Spirit, Spirit was changing its game to keep up.

6:32To better compete with the major carriers, Spirit also tried to merge with another budget airline, Frontier. In 2022, Frontier had agreed to buy Spirit. And that was a deal that the leaders of Spirit and especially Frontier had wanted to do for many, many years. So it kind of seemed like this long-desired merger was finally coming to fruition. And they were going to sort of take on the rest of the travel market and be a lot stronger for it. But competitor JetBlue got wind of the deal and said, actually, we want to merge with Spirit. So kind of ended up in a back and forth for months of competing offers and competing bids and trying to win over Spirit's investors.

7:15And JetBlue's offer was just a lot higher. And ultimately, that won the investors over. And Spirit broke up with Frontier and agreed to be acquired by JetBlue. That merger was eventually challenged by the Justice Department on antitrust grounds. The airlines fought the decision, but ultimately, a federal judge sided with the DOJ in 2024, and the merger didn't go through. The problem was, over the course of that year, when the airlines were waiting for government approval, Spirit's situation was sort of dramatically unraveling. You know, that all of the trends that we were just talking about that were kind of changing things for budget airlines were starting to come to a head.

7:59And by that point, you know, it's pretty financially weakened, and it had some big looming debt maturities, and that all comes to a head in the fall of 2024 when Spirit files its first bankruptcy. Since then, it's been a bit of a roller coaster for Spirit. The company came out of that first bankruptcy in early 2025, but quickly declared bankruptcy again a few months later. Then, in February of this year, the company announced plans with its creditors. The agreement would allow Spirit to emerge from bankruptcy a second time. Spirit announced it's going to get new capital injected into the business, and it's going to get rid of planes it doesn't need, refocus on sort of its core cities, and it's going to emerge from bankruptcy much smaller, but capable of surviving on its own.

8:48And that was kind of the plan in February and March. And then the war happened. And then the war happened. So fuel prices, you know, over a matter of weeks, double. All airlines are kind of grappling with this, trying to pass it along in higher fares and figuring out how they can manage. Spirit realizes it's going to need a lot more money. And that's when it turns to the federal government. Spirit Airlines appealed to the Trump administration in a last ditch effort to save itself. How that plan unraveled is next.

9:52We'll see you next time.

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11:05Behind the scenes, the final days of Spirit Airlines' life were chaotic. On Friday, our colleague Allison spoke to CEO Dave Davis. What did he say about what the last few weeks have been like for the company? So Spirit spent the last few weeks kind of looking for an 11th hour deal to somehow save the airline. It was clear the creditors were sort of no longer going to support this agreement to come out of bankruptcy. And they needed to find another source of capital. And at that point, you know, the last resort would be going to the federal government. So Dave Davis makes a call to Susie Wiles.

11:43the White House chief of staff, and she kind of helps connect them. And they go to the Commerce Secretary and they start talking about, like, what could maybe the government do for Spirit? And it seemed like they were getting, I mean, they were getting very close to an agreement for a deal that would give Spirit a loan of$500 million, and then the government would get the right to acquire an equity stake in the company. And it could have gotten a stake of sort of up to 90 % in Spirit. Wow. And so, you know, Spirit goes into talks with the federal government. What was the president's position on this?

12:16You know, he was enthusiastic about the deal. I said, I'd like to save the jobs, but we'll have an announcement sometime today. We gave them a final proposal. He seemed really invested in the idea of saving all those jobs. You know, he said multiple times, like, you know, I want to save an airline. Like, he really liked the idea. Commerce Secretary Howard Lutnick was a big supporter of the deal. And he told the president that saving thousands of jobs at Spirit could deliver a political win ahead of the midterm elections. That's according to a senior administration official and other people familiar with the matter.

12:55Was it a good deal? I mean, I guess good deal for who? Like, I guess the question was, you know, like, what are the taxpayers going to get out of this? And, you know, the president's view was like oil prices will go down and then Spirit will be successful again and we'll be able to sell it at a big profit. A lot of people in the industry were pretty skeptical of that idea, you know, for all the reasons that we've talked about that, like, well, what really is the plan for Spirit after this? Like, you know, hasn't been able to make money over the last six years. So like, OK, it gets another five hundred million dollars.

13:27What's going to be different this time? Right. Does that actually just keep it afloat for a little bit, or is it going to make any substantial change to the structure, the model? Right. Like, Transportation Secretary Sean Duffy had spent the last couple of weeks, like, feeling out the rest of the industry, trying to see if any other airlines would buy Spirit. And, like, even going back to JetBlue again multiple times. And, like, nobody wanted to. So, you know, I think there was a view, especially in the industry, that, like, why? And for the bondholders, they hated this idea. By all accounts, they sort of really feel like they're going to be left a lot worse off, like that they might be better off just letting Spirit liquidate, and they'll be able to recover some of their money by selling Spirit's assets.

14:11So the jet fuel costs, that was the final straw? Yes, that was the final straw. But Spirit, like when I've talked to Spirit's CEO, Dave Davis, he said he was really confident in the airline's plan. Like, he really believed that they had done real significant restructuring work. They'd gotten concessions from their labor unions. Like, they'd cut a lot of costs out of the business, you know, gotten rid of a lot of debt, that they were going to be able to come out and survive. And maybe then they would be in a good position to be acquired, you know, maybe next year. And, you know, his view is that, like, ultimately, at the end of the day, it was the jet fuel costs that did them in.

14:46On a 15-minute call last Thursday, Lutnick and Davis agreed that time had run out. So the airline pulled out a game plan that they'd been working on since last year. After that Thursday call, that's sort of when Spirit starts implementing a plan, which is called Plan Charlie, which is their shutdown plan. And it was something they'd really never hoped to implement, but it was, you know, if we have to shut down the airline, how would we do it? And the wheels start being put in motion. and it's everything from pulling parts of the website down so people can't book flights anymore to, you know, how are we going to tell employees that, like, don't come to work tomorrow?

15:29So, you know, kind of throughout the day Friday, core teams of people are sort of putting this plan in motion and making arrangements for the airline to cease operations in less than 24 hours. So even though Spirit employees haven't yet been told, their website is still up, people can still book flights if they want, but behind the scenes, they're working to get the airline shut down. This all happened over the weekend. What was the weekend like at airports that fly Spirit? Some of our colleagues went out to airports. We heard various things. So customers got an email, like really the pre-dawn hours, Saturday morning, and they were told, your flight is canceled, do not go to the airports.

16:12You know, all the kiosks had like a message displayed saying, you know, Spirit has ceased operations. You know, thank you for all these years. There was nobody at any of their gates, nobody at any of their customer service counters. Customers across the country left stranded and confused. I just woke up to the text message that Spirit has literally shut down. So now I have to figure out a way to get home. No travelers, no workers. This is the end for Spirit after 34 years in business. Card pairs will receive a refund, but offering no options for rebooking. Instead, directing people to a website for next steps.

16:50And what happens next for Spirit Airlines? What are the next steps for them? Well, I mean, there's like a core group of people who are still working there who are kind of finishing the wind down. And that number of employees will kind of go down, you know, 30 days, 60 days, 90 days as time goes on. And there's less and less to do. And then its assets will be sold off, like its planes, its real estate, even its corporate headquarters are going to be sold. Without Spirit and with these other budget airlines also kind of trying to figure out how to survive, what kind of changes could that lead to within the industry?

17:28You know, fuel price spikes have often led to big shakeouts in the airline industry. it can often be the catalyst that spurs bankruptcies, mergers, just more consolidation. And I think a lot of people are expecting that to happen again. And even though Spirit was kind of, it was already closest to the brink, it was already the most vulnerable, it's the first domino to fall. But I think people are expecting there could be other airlines, you know, maybe not quite this dramatic, like maybe not liquidating over the course of a day, but that there might be other bankruptcies. There might be mergers, you know, airlines that are kind of like fleeing to safety and looking for partners.

18:06And we don't quite know when that's going to start. But it does feel like the industry is on the verge of a big change. You know, you've been covering the slow collapse of Spirit for like, yeah, four years more now. What is your maybe final thought for Spirit? Yeah, it is. I mean, it's so crazy to see this happen. It was so dramatic. And I think we're all going to miss it in some ways. Like, I've flown Spirit, and I like it for what it is. Like, you sort of had to know what you were getting into. But yeah, like, sometimes you just want to pay 50 bucks, and then that's all you've got and all you want to pay.

18:48And it's just kind of sad that it's going away and that there's one less choice. And I really did not see it ending this way when this kind of journey started four years ago.

19:10That's all for today, Monday, May 4th. The Journal is a co-production of Spotify and The Wall Street Journal. Additional reporting in this episode by Alexander Gladstone and Brian Schwartz.

19:25Thanks for listening. See you tomorrow.