The low-cost Spirit Airlines announced Saturday that it has officially gone out of business after years of financial hardship, citing rising fuel costs resulting from the Iran War as the final straw.

The company said it had undergone “extensive and comprehensive efforts to restructure the business” following two bankruptcy filings in 2024 and 2025, but added that the “sudden and sustained rise in fuel prices in recent weeks ultimately has left us with no alternative.”

The airline informed customers that all flights had been canceled, and that refunds were being processed, but that they should look to rebook flights with other providers.

Spirit Airlines was founded in 1983 as Charter One Airlines, a charter tour operator. It was rebranded as Spirit in 1992, becoming a passenger airline and a pioneer of low-cost air travel, offering pared-down services in exchange for cheap base fares. It flew around 30 million passengers in 2025, reflecting a sharp drop from a peak of over 44 million in 2023 and 2024, according to 

President Donald Trump and his Administration floated a potential $500 million federal bailout for the Florida-based airline, but bondholders could not reach an agreement on how to restructure and ultimately save the company with the funds.

Why did Spirit shut down?

Spirit had been in financial difficulty long before the Iran War started, but the sudden global energy crisis caused by Iran’s closure and control of the Strait of Hormuz, through which about 20% of the world’s oil flowed, accelerated the company’s demise.

Dave Davis, Spirit’s President and Chief Executive Officer, cited “the sudden and sustained rise in fuel prices in recent weeks” as the reason for the company’s closure.

“Sustaining the business required hundreds of millions of additional dollars of liquidity that Spirit simply does not have and could not procure,” he said in the company’s statement. “This is tremendously disappointing and not the outcome any of us wanted.”

According to J.P. Morgan analysts cited by the Wall Street Journal, if fuel prices remained elevated, Spirit’s costs would have risen by $360 million by the end of the year.

The company’s closure follows years in which larger airlines have adapted to compete with Spirit’s low-cost, budget-saving services. Loyalty programs, branded credit cards, corporate partnerships, and frequent-flyer perks at larger airlines like Delta and American enticed budget-conscious travelers away from Spirit. 

Transportation Secretary Sean Duffy disputed that Spirit’s closure could be pinned on the Iran war in a news conference Saturday.

“Spirit was in dire straits long before the war with Iran," Duffy said. “Their model wasn't working. They couldn't get the fiscal health. So this was not the impetus. The war was not the impetus for Spirit.”

Duffy instead blamed the Biden Administration and former Transportation Secretary Pete Buttigieg for Spirit’s closure after the Justice Department sued to block a 2023 potential merger between it and larger competitor JetBlue. Biden’s Justice Department said the merger would cause tens of millions of travelers to face higher fares and fewer choices.

Trump’s attempts to salvage

Trump spent the past few weeks floating a possible bailout of Spirit, pitching a $500 million federal deal that could have led to the federal government owning up to 90% of the airline.

He told CNBC’s Squawk Box in April that he would “love somebody to buy Spirit, it’s 14,000 jobs,” and that “maybe the federal government should help that one out.”

His interest drew concerns from Republicans and Democrats alike, though, who questioned whether a takeover of Spirit was the best use of U.S. tax dollars.

“The government doesn’t know a damn thing about running a failed budget airline,” Senate Republican Sen. Ted Cruz said on X in April.

In Davis’s statement, he thanked the Administration “for their extraordinary efforts to try to preserve jobs and service across the country.”

In a statement on Saturday, Duffy and the Transportation Department said that other airlines are capping ticket prices for Spirit customers looking to rebook their flights. 

Are other low-cost airlines under threat?

Since the beginning of the U.S.-Israeli attack on Iran on Feb. 28, the price of  jet fuel has increased by nearly 70% in the U.S., according to the Argus U.S. Jet Fuel Index.

The crisis has impacted practically every airline and air traveler, raising prices and creating travel uncertainty. 

This increase is being felt heavily by customers as airlines look to balance costs with increased  baggage and ticket prices. According to travel search engine Kayak, the average airfare for an international trip from a U.S. point of origin has increased by about 37% since the war began.

Smaller airlines around the world are having to make harder decisions due to their tighter profit margins. In mid-April, Mexican holiday airline Magnicharters canceled all flights for two weeks, stranding some travelers in popular vacation destinations like Cancún, Mérida and Huatulco.

Meanwhile, Ryanair, Europe's largest airline, said it is considering reducing routes, along with smaller airlines in Europe and Asia like Vietnam Airlines, AirAsia, and Scandinavian Airlines—all citing rising jet fuel costs.