Spirit Airlines looked it was in the clear of reemerging from bankruptcy, but rising fuel costs threaten its exit

On Feb. 24, just days before the war in Iran began, Spirit announced that it expected to exit Chapter 11 bankruptcy in the late spring or early summer, after striking a deal with its lenders and secured creditors. Since then, the war has severely limited tanker traffic in the Strait of Hormuz, spiking oil and jet fuel prices, which has reverberated through the airline industry and, rumor has it, jeopardizing Spirit’s tenuous finances.

The situation has gotten so dire that the airline has asked the Trump administration for hundreds of millions of dollars in emergency funding, The Air Current reported.

A Spirit spokesperson told Fortune the company does not comment on market rumors and speculation and that operations were continuing as normal. 

Spirit’s restructuring plan hinged on much lower fuel prices. The airline is planning to spend $2.24 per gallon in 2026 and $2.14 in 2027, according to a March filing to the Securities and Exchanges Commission. As of April 16, jet fuel cost $4.32 per gallon, almost double the estimate.  

Earlier this month, J.P. Morgan estimated that if fuel stayed at $4.60 a gallon this year—its price in late March—Spirit’s forecast operating margin for fiscal year 2026 could deteriorate to about negative 20% from the 0.5% margin proposed in the company’s restructuring plan. This could add $360 million to the company’s expenses for the fiscal year, which is more than its cash balance at the end of FY 2025, according to the bank.

There are reports that the airline was at risk of liquidation, though the company is not expected to liquidate this week and is “shaking all the trees” to raise cash, Reuters reported. 

Spirit is working its way out of its second bankruptcy since November 2024. In the restructuring  agreement announced in late February, the company said they will reduce off-peak flying and  adjust seasonal demand. The company expected to reduce its debt and lease obligations from $7.4 billion pre-bankruptcy to approximately $2.1 billion post-emergence.

Spirit is far from the only airline feeling the pinch of the war in Iran. In mid-March, Delta CEO Ed Bastian said the conflict has increased the airline’s operating costs by about $400 million. United CEO said if jet fuel prices stayed at twice their pre-war costs, it would cost the airline an additional $11 billion in annual costs. Nearly all major U.S. airlines, including American, United, Delta, Southwest, and JetBlue, have raised checked bag fees to try to offset increased costs. 

It will take months for jet fuel prices to return to pre-war levels, the head of the International Air Transport Association (IATA) representing global airlines warned earlier this month.