Michael Girdley explains why Spirit Airlines' bondholders rejected a $500 million White House rescue. They'd get only 10% equity while the government took 90%, but liquidating their collateral—roughly 100 Airbus jets worth $45-$55 million each—could earn them ten times their investment instead. The rejection means 7,500 job losses and higher fares for consumers.
As I record this in 2026, the White House has just offered $500 million to try to rescue and keep Spirit Airlines in business. But the bondholders, the people who are the debt holders for the business and loaned it money, said no. 3 hedge funds had put $475 million a couple years ago into the company, uh, to keep it going as debtor-in-possession financing, basically meaning they had loaned money to the company to keep it going, but they were in control. The collateral was 100 or so Airbus A320 and different variant jets. Here's the thing about those: if you want to go buy one today from the factory, you can't. The waitlist is pushed back into the 2030s before you can even get a new one. And those guys who loan Spirit money, they know this. They know that those jets are potentially worth more on the open market as parts or sold as a whole than the entire company is. If you do the math at $45 to $55 million per plane times 100 planes, before Spirit even would sell any of their gates. That means that the collateral that that $475 million is backed by, those planes, is worth nearly $500 million. The government's offer would have let these bondholders keep 10% of the company with the government owning 90%. And most importantly, the government's money put in, put in front of all the other creditors, meaning the government would get paid before any of those guys did. So that's the math they did. Why, why would I take 10% of a failing company that's burning cash when I could turn my $475 million into nearly $5 billion? If you want to know why Spirit is failing, this is a big part of it. Those bondholders aren't interested in getting no returns at all. They didn't take all that risk for nothing. And very likely, when they were presented the offer, they would have just thrown it out the window. There's no reason to even consider it. It's so ridiculous compared to their Plan A, which is 10 times their money. But unfortunately, so those guys can get paid, uh, 7,500 people are going to lose their jobs when Spirit Airlines shut down. And you and I, because there's going to be less competition, are going to be forced to pay higher fares. I did a full video on what killed Spirit Airlines. It's this and a few other things, uh, you can check it out on my bio page or in the comments below.
