Spirit Airlines' cash available to continue operating won't last long and a government bailout package is on the table, a lawyer for the low-cost airline said at a hearing Thursday.
President Donald Trump told reporters later Thursday at the White House: “We're thinking about doing it, helping them, meaning bailing them out or buying it.”
Trump told reporters that “when the price of oil goes down,” the government could “sell it for a profit.”
“I would love to be able to save those jobs. I would love to be able to save an airline. I like having a lot of airlines, so it's competitive,” he said.
Davis Polk's Marshall Huebner, the airline's attorney, did not describe the proposed rescue plan at Thursday's bankruptcy hearing, but people familiar with the matter told CNBC this week that a $500 million loan is on the table that could give the government a potential 90% stake in the Florida-based airline. They requested anonymity because they were not authorized to discuss the conversations.
The deal would also allow the U.S. government to select a board member, a person familiar with the potential terms told CNBC.
The White House and Spirit did not respond to a request for comment on the board position.
“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 Americans continue to have access to affordable fares,” Spirit CEO Dave Davis said in an emailed statement.
The company needs access to existing cash or new funds in the coming days to continue operations, Huebner said Thursday.
“The cash actually available to Spirit to fund ongoing operations won't last much longer,” he said. “Therefore, new financing, one or both, or access to almost $240 million in restricted cash is absolutely essential. Approximately no later than the end of next week.”
The airline has been at risk of closing. The potential deal has been shared with several groups of creditors, according to people familiar with the matter.
Spirit had hoped to emerge from bankruptcy by mid-year, but a rise in fuel prices since the United States and Israel attacked Iran has complicated those plans, the company said.
The iconic discount airline has faced problems for years, including an engine recall, an acquisition by JetBlue Airways that a federal judge blocked two years ago, changing customer preferences for more exclusive deals and increased costs even before fuel prices rose this year.
“The spirit is now definitely at a crossroads,” Huebner said, with “several hundred million dollars” of the company's cash “locked up and inaccessible” under bankruptcy loan conditions, while other funds are in separate accounts for payroll and tax payments.
Huebner said the additional financing would “create a fierce and adequately capitalized competitor in the airline space” as an independent airline, “but also potentially as the strongest player in what many believe needs to happen next: consolidation in the value airline space,” hinting at a possible merger.
