- Spirit Airlines has come close to liquidation due to rising jet fuel prices.
- The carrier built its plan on fuel costs of $2.24 a gallon in 2026 but prices reached $4.24 a gallon.
- Jet fuel increased by 97.6pc in North America compared to 2025 averages after the closure of the Strait of Hormuz.
- Spirit downsized its fleet from over 200 aircraft to between 75 and 80 under Chapter 11 protection.
- The airline filed for bankruptcy in November 2024 and again in August 2025.
Spirit Airlines has come close to liquidation according to reports and is facing pressure on its operations as a result of rising jet fuel prices. The ultra-low-cost carrier has operated under Chapter 11 bankruptcy protection and has downsized its fleet from over 200 aircraft to between 75 and 80.
Spirit Airlines built its restructuring plan on fuel costs averaging about $2.24 a gallon in 2026 and $2.14 a gallon in 2027. Jet fuel prices reached around $4.24 a gallon and increased by 97.6pc in North America compared to 2025 average prices according to the International Air Transport Association. The rise followed the United States and Israel attack on Iran which led to the closure of the Strait of Hormuz. Creditors questioned the airline ability to make upcoming payments and Spirit revealed in its latest annual report that the increase in fuel prices would have an immediate and substantial negative impact. Spirit filed for Chapter 11 bankruptcy in November 2024 and again in August 2025 after a proposed merger with JetBlue was blocked in early 2024.
Spirit Airlines management held ongoing talks with creditors and the situation remained fluid. The airline declined to comment on market speculation. If the airline entered liquidation operations would cease immediately and flights would be cancelled. Passengers who booked with a credit card remained protected for refunds and other carriers offered rescue fares in past cases.
Spirit Airlines shared it would not comment on market speculation. JPMorgan analyst Jamie Baker shared if fuel stayed at about $4.60 a gallon this year Spirit forecast operating margin would deteriorate.
The news comes at a crucial time because Spirit Airlines, instead of facing a severe and immediate risk of ceasing trading through liquidation, the airline was looking forward to completing its planned exit from Chapter 11 bankruptcy. The US ultra low cost carrier filed for its second Chapter 11 protection in August 2025 and had reached restructuring support agreements with creditors in February and March 2026 that were intended to slash debt cut capacity and enable an emergence from bankruptcy by early summer 2026 as a smaller operation with around one hundred aircraft.
However sharp rises in jet fuel prices triggered by geopolitical tensions have undermined the financial assumptions in that plan leading to warnings that liquidation could be decided as early as mid April 2026. As of 18 April 2026 no final decision has been confirmed but sources close to the process indicate the airline is under intense pressure with margins potentially turning deeply negative and defaults on obligations risking accelerated repossessions.
The three major Irish based aircraft lessors AerCap Avolon and SMBC Aviation Capital have historically held significant exposure to Spirit through operating leases on Airbus A320 family aircraft but the ongoing Chapter 11 process has already substantially reduced their risk through court approved lease rejections and settlements.
AerCap as Spirit’s largest lessor agreed in October 2025 to a comprehensive deal that included the rejection of twenty seven aircraft leases a cash injection of one hundred and fifty million US dollars from AerCap to Spirit and full resolution of all claims and disputes along with commitments for future deliveries of thirty aircraft. This settlement has largely insulated AerCap from further material losses with any remaining aircraft now subject to standard repossession rights under Section 1110 of the US Bankruptcy Code.
Avolon’s exposure was more modest and was addressed in the same October 2025 wave of rejections when Spirit was authorised to reject four leased Airbus aircraft as part of a broader cull of sixty seven to eighty seven leases. SMBC Aviation Capital faced the largest volume in that round with twenty one aircraft returned but like its peers has benefited from the secured nature of aviation leases which allow swift repossession and remarketing without the prolonged delays seen in other industries.
Should Spirit ultimately cease trading through liquidation rather than restructure the primary impacts on these Irish lessors would centre on the accelerated return of any residual leased aircraft the need to store and remarket them in a potentially oversupplied narrowbody market and the recovery of any outstanding maintenance or return condition claims.
Because aviation lessors enjoy strong protections under US law the financial hit is expected to be contained compared with unsecured creditors and the lessors have already absorbed much of the fleet reduction through the bankruptcy process to date. A sudden influx of A320neo family aircraft could however exert downward pressure on lease rates and residual values across the sector for a period which would indirectly affect portfolio yields at AerCap Avolon and SMBC Aviation Capital given their heavy concentration in similar Airbus types.
All three lessors have diversified global fleets and strong balance sheets so the overall risk remains manageable with no indication of broader solvency concerns arising from this single counterparty. The situation continues to evolve rapidly and lessors are monitoring developments closely through the bankruptcy court proceedings.
