DANIA BEACH, Fla. – Spirit Airlines is preparing to shut down operations after rescue talks with the U.S. government and creditors failed to produce a deal, according to reports Friday.

The Wall Street Journal reported that the airline is preparing to cease operations after failing to identify a path out of bankruptcy. Spirit had been negotiating a $500 million government-backed lifeline, but the proposed deal collapsed due to disagreements between federal officials and bondholders.

Spirit has not officially announced a shutdown and said it was operating as usual as of Friday, but its position has sharply deteriorated. Faytuks Network reported earlier this week that the carrier had only enough available cash to continue operations for a matter of days, not weeks, after talks over a rescue package stalled.

Fuel costs have also become a major pressure point. Spirit’s restructuring plans were built around jet fuel priced near $2.24 a gallon in 2026, but prices have surged since the Iran conflict disrupted energy markets. The sharp increase has pressured carriers across the industry, with budget airlines especially exposed because they have less room to absorb higher operating costs or pass them on without weakening demand. For Spirit, the fuel spike undercut an already fragile bankruptcy plan and added urgency to the failed rescue talks.

A shutdown would mark one of the most significant U.S. airline failures in years and could reshape budget air travel. Spirit’s low fares have long pressured competitors on leisure and short-haul routes, and its exit could reduce capacity and push ticket prices higher in some markets.