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Spirit Airlines has crashed down to earth. On Saturday, the ultra-low-cost carrier abruptly shut down operations, leaving customers and crew members stranded across the U.S. In a statement, the company cited the rising cost of fuel due to the Iran war and the failure to obtain a bailout from the Trump administration as major contributors to the airline’s collapse.
“In March 2026, we reached an agreement with our bondholders on a restructuring plan that would have allowed us to emerge as a go-forward business,” Spirit CEO Dave Davis said in a statement. “However, the sudden and sustained rise in fuel prices in recent weeks ultimately has left us with no alternative but to pursue an orderly wind-down of the Company.” The company had filed for bankruptcy twice in the past few years and was dealing with a wide range of (pardon me) headwinds.
An older part of history got more attention the past few days, though. In 2022, Spirit announced plans to merge in a $3.8 billion deal with JetBlue, its somewhat larger and more expensive low-cost competitor. Together, the two airlines said, they would pose a better foil to the giants United, American, and Delta, which had formed over the decades through their own big piles of mergers and acquisitions. The Biden administration did not like this idea, arguing that Spirit was not just any ULCC but the cheap airline that kept the rest of the industry both honest and innovative.
In 2024, the federal judge presiding over the case sided with the antitrust hawks in President Joe Biden’s government and blocked the merger. Spirit was a “uniquely disruptive competitor,” he wrote in a 110-page decision. But the judge, William G. Young, felt the airlines had made some compelling points. He said JetBlue and Spirit together would place more pressure on United, Delta, and American. He acknowledged that Spirit’s business was in a precarious position after several years of the bigger airlines squeezing the company with their own “basic economy” options. Airbus engine problems resulted in temporarily grounded planes, and Spirit lost billions in just a few post-COVID years. The airlines emphasized Spirit’s dire financial straits, but the judge found that that distress didn’t meet a rigorous “failing firm” threshold that would’ve triggered friendlier antitrust treatment. It was a thick case, and the airlines lost it.
Then came the bankruptcy filings, then the Trump bailout negotiation that fell apart last week despite the president’s apparent fixation on keeping Spirit around. That it was President Donald Trump whose Iran war caused the oil spike that made fuel more expensive did not stop Republicans from jump-starting the blame game. The party has treated the episode as an example of Democratic overbearance killing off a (sort of) beloved company. Sean Duffy is even taunting Pete Buttigieg about it, in a bout of dreaded intra–transportation secretary violence.
Who’s right? I talked through it all with Jan Brueckner, a longtime economist at UC Irvine who has studied the airline industry for decades. He has also consulted for airlines, including JetBlue, though he did not have a role in this case. Our conversation has been edited and condensed for clarity.
Alex Kirshner: Since Spirit announced and then actually did wind down, there’s been a pretty significant political blame game over the antitrust trial a couple of years ago. How much is it fair to hang this on the Biden administration fighting the merger, and how much does that miss?
Jan Brueckner: I think it’s pretty much fair. Now, there’s a question of hindsight versus foresight. In hindsight, the decision looks ill-advised. Why? A merger of those two carriers could have helped both of them and helped the traveling public, because what the merger would’ve done is create a larger low-cost carrier. JetBlue is a low-cost carrier. Spirit was an ultra-low-cost carrier. After the merger, Spirit probably would’ve adopted the business model of JetBlue, or the part of Spirit that was merged into JetBlue would’ve adopted that business model. So the ultra-low-cost aspect of Spirit might have disappeared somewhat, although who knows? Maybe JetBlue would’ve tried to adopt some of Spirit’s strategies as well.
That got to the Biden administration’s argument, didn’t it? That Spirit isn’t just a ULCC, but Spirit is special. We all know Spirit. It’s the cheapest, or the most lovably disgusting, and it couldn’t be replaced. Would you not give that much credit?
No, I think it’s true. There was a tough decision involved in the court case. On the one hand, it’s true that Spirit was more of a disruptor than JetBlue, and you don’t want a disruptor to go away. But on the other hand, having a really big, somewhat less disruptive airline formed by the combination of the two carriers might’ve been good too. I think the court placed too much emphasis on the loss of Spirit’s market discipline and not enough emphasis on the potential benefits of having a big low-cost carrier. Look at Southwest. It’s a very big carrier. It’s almost on a par with the three network carriers. Having another one getting close in size to that would be beneficial.
So it’s a tricky call, but the thing that tips the balance is that the fragile nature of Spirit financially was becoming a bit clearer toward the beginning of this antitrust trial. What should have happened is that the antitrust issue should have been merged into, so to speak, a simultaneous consideration of the fragility of one of the carriers in question, with the notion that saving a fragile carrier through a merger that would in many ways have been good was in the public’s interest. In hindsight, that looks a lot more like a reasonable argument. At the time, maybe not so crystal clear to the players.
It’s implied that Spirit’s executives wish this deal had been allowed to go through. But in the announcement that the company was going out of business, they didn’t name that as a factor but did name a “recent material increase in oil prices.” If you were signing the death certificate, how many causes would you put there?
The proximate cause is a fuel price increase, no question about it. Whether Spirit could have limped through and become successful again, it’s hard to say. That was one of the reasons the proposed government bailout was a gamble, because you just don’t know what’s going to happen. This is a little different from the car industry bailouts during the financial crisis, because nobody doubted that those companies would have strong demand for their services going forward. They were just in temporary trouble. The thing about Spirit that makes it complicated is that the network carriers started imitating the business model of Spirit and the other ultra-low-cost carriers through basic economy fares.
That wasn’t going away. It was going to be a continuing issue when it came to the ability of the ultra-low-cost carriers to compete with the network carriers. Whether Spirit could make a go of it in the long run, it’s not clear.
In a different course of action, JetBlue is allowed to buy Spirit, and the prices for those flights go up a bit. Or could someone else have bought it and kept Spirit’s status as the disruptor? Was there any world where I could’ve kept flying from LAX to Pittsburgh to see my parents for $89 and a big pile of bag fees?
I don’t know. I’ve never even flown on JetBlue or Spirit. But my guess is that maybe it wouldn’t be $89. It would’ve been $110 or something if they had merged.
So the days of the incredibly cheap flights were under pressure no matter what.
Right.
The Spirit-JetBlue side made what I’ll call a “merger for thee but not for me” argument: Delta, United, and American all got bigger through consolidation. Given that status quo, should a merger of smaller airlines be seen more charitably than we might look at, say, a Big Tech acquisition?
I think it’s probably the case that the Biden Justice Department was a bit inclined to reverse the merger wave in the industry, because obviously there had been one. You had all these mergers that created the Big Three. So there may have been a philosophical thing: “We’re going to put our foot down on more mergers. We’re not going to let this one happen.” But on the other hand, there’s no evidence that the mergers have hurt the flying public. Airfares are going up now because of fuel prices, but airfares continue their downward real trend, in constant dollars, that started back in 1980 when the airlines were deregulated. The mergers haven’t led to increases in fares.
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It’s true. I have written about this at Slate, though in a complaining tone, because basic economy has gotten pretty stripped down.
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But there’s another part of the history that’s interesting, and that is that Frontier was interested in merging with Spirit. Frontier is another ultra-low-cost carrier that operates a big hub out of Denver. As far as I know, those two carriers don’t overlap all that much. Spirit is more Florida-oriented and East Coast–oriented. So that merger would have been a really good idea. There would have been no disappearance of the disruptor. You would have had a merger of two disruptors. Moreover, the Justice Department probably would have said, “OK, this is fine.” We’re going to have a bigger ultra-low-cost carrier, and that’s going to be good for passengers. When JetBlue came up with a higher offer, a lot of people were saying, “Watch out, this is not necessarily going to be met with approval by the antitrust authorities, so this is a risky merger.” Nobody said that about Frontier and Spirit. The Spirit stockholders liked the JetBlue offer better, and maybe they shouldn’t have. Maybe they should have gone with the safer merger.
Where do you think Spirit turned wrong? Or was this about the world changing around it?
I think the basic economy strategy of the network carriers was really important in all of this. Spirit had another recent problem that wasn’t its fault: the defective engines on the Airbus planes. So it couldn’t fly dozens of planes in the fleet that it had. Some people, like the United CEO, were saying Spirit’s business model was flawed. Well, they copied the damned Spirit business model. So how flawed could it be?
