Spirit Airlines is preparing to cease operations after a $500 million government rescue deal collapsed.

According to sources familiar with the matter, the discount carrier has been unable to secure sufficient support from bondholders and the government to obtain the necessary funding for continued business. Without agreement from both groups, Spirit could not access the required capital and is now planning for the possibility of running out of cash and shutting down entirely.

Spirit has spent much of the past 18 months in Chapter 11 bankruptcy protection as it faces the threat of liquidation over rising fuel costs linked to the Iran war.

The proposed $500 million lifeline would have granted the government a stake of up to 90% in the budget airline.

President Donald Trump previously indicated he was considering a taxpayer takeover of Spirit Airlines, with plans to resell the troubled carrier once oil prices decline. “They have some good aircraft and good assets,” Trump said at an Oval Office event. “I’d love to be able to save those jobs. I’d love to be able to save an airline.”

Spirit, known for its ultra-low fares and bare-bones service, has been struggling to stay aloft amid mounting debt, rising costs and failed merger attempts. The airline filed for Chapter 11 bankruptcy protection in November 2024 and again in August 2025.