(SeaPRwire) – The Trump administration is considering the use of the Defense Production Act to potentially support a bailout for Spirit Aviation Holdings Inc., according to an individual with knowledge of the private discussions who asked to remain anonymous.
This 1950 law, enacted at the beginning of the Korean War, grants the U.S. president broad emergency authority to direct the production of goods and services deemed essential for national defense, including the provision of loans and investments.
Applying this statute to a commercial airline would likely face legal and political challenges. It remains unclear what national security justification the Trump administration would present for bailing out Spirit, a budget airline that primarily operates domestic routes.
Historically, presidents have utilized the law for various purposes, some of which have appeared to deviate from its primary defense objective. The statute has been invoked for a range of actions, from expediting the production of face masks during the COVID-19 pandemic to increasing the supply of baby formula during a national shortage.
The Trump administration has also recently taken measures to deploy the law in support of energy production, including facilitating offshore oil development and strengthening power grid infrastructure and coal-fired electricity generation.
“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 stated on Friday.
He added, “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.”
CBS News had previously reported that the act was being considered as part of a rescue package.
These deliberations are occurring as Spirit undergoes a Chapter 11 restructuring, having filed for bankruptcy protection due to mounting losses and debt. The airline has continued its operations throughout this process.
Before the start of the Iran war, which led to a surge in jet fuel prices, Spirit was anticipated to emerge from bankruptcy this summer. This was after reaching an agreement with creditors on a plan to reduce billions of dollars in debt and lower its fleet costs.
Bloomberg had previously reported that the administration was developing a plan that could offer the airline up to $500 million in financing in exchange for warrants to acquire as much as 90% of Spirit upon its emergence from bankruptcy.
This potential deal is not yet finalized and could still be altered or abandoned.
On Thursday, Trump indicated that he was considering the U.S. government purchasing Spirit to help the carrier avoid liquidation.
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