White House mulls using Defense Production Act in Spirit Airlines takeover

The Trump administration is exploring using the Defense Production Act as part of a strategy to save the beleaguered Spirit Airlines, according to U.S. officials familiar with the discussions. 

President Trump is open to some type of federal action, several sources told CBS News, and he has said publicly he'd "do it to save the jobs."

Spirit has declared bankruptcy twice in the past two years, after the Department of Justice blocked a merger with JetBlue during the Biden administration. The Iran war has been driving up jet fuel costs for all airlines and earlier this month, creditors expressed serious doubts Spirit could remain viable.

The Defense Production Act is an emergency power typically used to compel private sector companies to prioritize government contracts and increase supplies of critical goods.

It also includes providing loan authority to private firms for national defense, potentially a lifeline for the airline.

The strategy would be subject to approval from Spirit's creditors, two of the officials told CBS News.

The Office of Management and Budget has explored what a federal bailout of Spirit Airlines would look like and has discussed possibilities that would include Commerce Department and Pentagon involvement.

The government would lend Spirit $500 million at a reasonable interest rate, and become the top debtor in the bankruptcy pecking order. The loan would be protected by Spirit assets that would exceed the government's costs, and would provide taxpayers with a warrant — the right to own 90% of the company after it emerges from bankruptcy.

The Pentagon would use Spirit's excess capacity for transporting troops, military cargo or other missions, sources told CBS News.

The airline would then likely be sold to another carrier. 

The threat of Spirit Airline's liquidation came as a result of the carrier skipping an interest payment, CBS News has learned.

That missed payment came to light during a bankruptcy hearing Thursday and was confirmed to CBS News by sources familiar with the ongoing negotiations. By missing that payment, it put Spirit into a potential default on its debtor-in-possession agreement with creditors. 

Creditors have a seven-day window to initiate a default action, and this prompted Spirit's attorney to warn that the airline may only have days left to operate.

While Spirit has about $250 million in cash, that money is restricted because creditors have a lien on it, the bankruptcy hearing revealed. Unless given access to those funds, Spirit's cash on hand is running low.  

The government has presented Spirit creditors with a term sheet, and is communicating with individual creditors about the proposed deal that would make the U.S. government the senior bondholder, sources said. 

"President Trump has openly expressed his interest in helping Spirit Airlines, and the Administration continues exploring possible options to ensure the airline remains in operation for its passengers and employees," White House spokesman Kush Desai said in a statement provided to CBS News Friday evening. "Any reporting, however, about the mechanism or structure of any deal between the federal government and Spirit Airlines, unless officially unveiled by the Administration, should be regarded as speculation."

Commerce Secretary Howard Lutnick and the White House have advocated for proceeding, arguing that if the government isn't involved, the company would likely be liquidated and its jobs lost. Spirit directly employs about 7,500 people, according to an airline spokesperson.  

The stance has put Lutnick at odds with Transportation Secretary Sean Duffy who argued against it, saying that this move could create a political problem and would prolong what is seen as inevitable with a financial failure for the airline. 

Trump officials generally agree that it would be preferable to avoid letting an American company go out of business during the war with Iran, especially as fuel prices keep rising.

Mr. Trump said Thursday of Spirit, "They have some good aircraft, some good assets." 

Spirit doesn't own all of its assets outright, one official said. At the end of 2025, Spirit owned 48 planes and leased 83. 

In early April, Spirit and United Airlines executives approached White House officials, with part of a liquidation plan that would include selling Spirit's "slots" at Newark Airport, a United hub. Slots are scheduled times for airlines to take off or land at a given airport. 

Trump officials rejected that idea. The federal government owns slots, which would be preserved to make Spirit more attractive for a future owner, one of the sources said. 

The president has voiced interest. "They have some very good slots too, which are pretty valuable," he said this week.