White House Considers Defense Production Act to Support Spirit Airlines

The Trump administration is considering invoking the Defense Production Act (DPA) to provide financial assistance to Spirit Airlines, which is facing significant financial challenges.

President Trump has expressed openness to federal intervention, stating he would "do it to save the jobs."

Spirit Airlines has declared bankruptcy twice in the past two years, following the Department of Justice's blockage of a merger with JetBlue during the Biden administration. The ongoing conflict with Iran has led to increased jet fuel costs, further straining the airline's financial position.

The DPA, typically used to prioritize government contracts and boost production of critical goods, also allows for loan authority to private firms for national defense purposes. This provision could serve as a potential lifeline for Spirit Airlines.

The proposed strategy would require approval from Spirit's creditors. The Office of Management and Budget has explored a federal bailout plan involving the Commerce Department and the Pentagon. The plan includes a $500 million loan to Spirit, positioning the government as the top debtor in the bankruptcy hierarchy. The loan would be secured by Spirit's assets and provide taxpayers with a warrant to own 90% of the company post-bankruptcy.

The Pentagon would utilize Spirit's excess capacity for transporting troops and military cargo. Following restructuring, the airline would likely be sold to another carrier.

Commerce Secretary Howard Lutnick supports the intervention, arguing that without government involvement, the company would likely face liquidation, resulting in job losses. However, Transportation Secretary Sean Duffy opposes the move, suggesting it could create political issues and prolong the airline's financial struggles.

President Trump highlighted the airline's valuable assets, stating, "They have some good aircraft, some good assets."

In early April, Spirit and United Airlines executives proposed selling Spirit's slots at Newark Airport as part of a liquidation plan. The administration rejected this idea, opting to preserve the slots to make Spirit more attractive to potential buyers.