A cautionary tale about spirit airlines

What happened a few weeks ago with Spirit airlines is maybe a little dispiriting (pun intended) for several specific reasons: we lost a low cost carrier that drove the competition to keep pricing down, there were many thousands of workers who were laid off, and we got a not-so-great lesson in economics.

Its that lesson that I wanted to talk about.  Spirit was a Fort Lauderdale - based airline, and that made it an employer of note in my hometown.  Did I love them?  No.  Had I ever flown them?  Also no.  But they drove some amount of economy here locally. 

Sometime around 2016, Frontier looked to acquire them, but the price point was too low, and the shareholders rejected that.  Then, in 2022, there was a much-hyped offer for JetBlue to acquire them. This one was complicated.  It wasn't entirely clear what JetBlue would get out of it, other than adding planes and some routes to its portfolio.  But it wasn't.a great fit and there was internal strife, and several rejections by shareholders and the board was also wwrking to reject it.

Ultimately, it was nixed by the Biden-era DOJ who said that allowing them to merge would raise prices and stifle competition.  To be fair, if the DOJ had allowed it to proceed, its still possible (maybe even likely) that the board of JetBlue would have killed the deal anyway.  But, sure, lets "blame it on Biden" ...

The thing that was clear 4 years ago was that without a change, Spirit would not be able to continue operation for very long.  It was a well-known fact that they needed operating capital in an ever-changing landscape.

Enter private equity in around 2024, who bought stakes in the airline and helped manage it along, with an intent to have it sold somewhere.  

But it still wasn't enough, and in early 2026, Spirit needed an influx of capital.  The airline and the private equity ownership asked the government for a bailout. 

The T-rump administration asked for a 90% stake in the company, which would make it government owned.  The board of Spirit wasn't aligned with that.  And that private equity firm said no thanks; there would be little return for them.

So they declared bankruptcy, and are selling their planes, and their routes to other airlines (notably: JetBlue).  And in the end, they. went out of business and we lost a low-cost airline anyway.  Based on the desire to have it be state run, its funny that almost no one is saying "blame it on T-rump" and point back to the failed merger as their reason for the bankruptcy.

But its as much the problem of private equity as anything.

Is sad that the media can't wrap their head around all that's happened here.  The debt should get mostly paid off, but the private equity firm will also get a nice payout for their "help" ... and as always, we consumers get screwed.