Spirit Airlines, a budget carrier in the United States, has begun winding down operations, cancelling all flights, after talks with the Trump administration to secure a $500m bailout failed. Experts say a spike in aviation fuel prices from the US-Israel war on Iran dealt the final blow to the struggling airline that pioneered the ultralow-cost carrier model.

The airline’s shutdown after 34 years has left some 17,000 staff members unemployed, many passengers stranded, and raised doubts about the future of budget air travel.

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How did Spirit Airlines reach this point? Did the US-Israel war on Iran deliver the final blow?

Here’s what we know:

What has Spirit Airlines said?

On Saturday, Spirit Aviation Holdings, the airline’s parent company, said the company had started to wind down operations.

“Spirit Aviation Holdings, Inc … today regretfully announced that the Company has started an orderly wind-down of operations, effective immediately. All Spirit flights have been cancelled, and Spirit Guests should not go to the airport,” the company said in a statement on Saturday.

The statement added that, despite its efforts, “the recent material increase in oil prices and other pressures on the business have significantly impacted Spirit’s financial outlook”.

Spirit Airlines, whose airfares were lower compared with other US airlines, had 4,119 domestic flights scheduled between May 1 and May 15, offering 809,638 seats, according to the latest data from Cirium, an aviation analytics firm.

The carrier’s parent firm started as a long-haul trucking company in 1964. It shifted to aviation around 1983. The carrier rebranded from Charter One Airlines to Spirit in 1992.

How did Spirit Airlines reach this point?

The airline had been struggling financially for years and had filed for bankruptcy twice – in November 2024 and then in August 2025 – due to continued losses, high debt, and intense competition from other airlines.

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According to a May 2 report by the Reuters news agency, Spirit had recently reached a deal with its lenders that would have helped it emerge from its second bankruptcy by late spring or early summer.

But the war on Iran, which led to a significant increase in aviation turbine fuel (ATF) prices, added to Spirit’s financial struggles and complicated its bankruptcy exit.

Spirit’s restructuring plan assumed ATF costs of about $2.24 a gallon in 2026 and $2.14 in 2027, but prices had climbed to about $4.51 a gallon by the end of April, leaving the carrier unable to survive without new financing.

A Spirit board meeting ended without an agreement to rescue the company, a person close to the discussions told Reuters late on Friday.

US Transportation Secretary Sean Duffy told Reuters he tried to get many airlines to buy Spirit but found no takers. “What would someone buy?” Duffy asked. “If no one else wants to buy them, why would we buy them?”

US President Donald Trump also said he had tried to bail out the airline with a $500m financing package.

“If we can help them, we will, but we have to come first,” Trump told reporters. “If we could do it, we’d do it, but only if it’s a good deal.”

However, a creditor close to the deal told Reuters, “The Trump administration made an extraordinary effort to try and save Spirit, but you can’t breathe life into a corpse. Given that, the company should make its intentions clear for the sake of its customers and employees.”

Anita Mendiratta, special adviser to the UN Tourism secretary-general, noted that while war and geopolitical instability may not have caused Spirit’s collapse, they likely delivered the final blow.

“Surging fuel costs exposed the vulnerability of airlines operating on thin margins with little room for shock absorption,” she told Al Jazeera.

“Spirit’s weaknesses were already there – it had already gone through two bankruptcy filings in the two years prior; global instability simply accelerated the inevitable. In today’s aviation market, volatility is no longer an exception; it is the operating environment,” Mendiratta said.

Are other airlines also under pressure due to the Iran war?

The war on Iran has disrupted global oil and gas prices, with Brent crude rising above $111 a barrel on Friday. The high crude oil prices have also caused ATF prices to rise, affecting budget airlines badly.

Across the globe, airlines have been increasing prices to reflect the high ATF prices, and some have also reduced their flight operations.

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German airline Lufthansa said last month it cancelled 20,000 flights in a bid to protect itself from the soaring ATF costs.

On Friday, leading Indian carrier Air India said it has increased fuel surcharges on all flights, adding that it will reduce 100 flights a day across its domestic and international routes.

Mendiratta noted that the aviation industry is on alert as airlines carrying high debt, facing fuel cost volatility, labour cost pressures, fleet constraints, and sustained pricing pressure remain exposed [to the war], especially those operating through a low-cost carrier model.

“What happens next is a defining test of aviation leadership. The rapid response from rival airlines to protect stranded passengers reflects an industry that understands its most valuable asset is not aircraft or market share, it is customer trust [both traveller and cargo],” she said.

“Just as importantly, how airlines support displaced employees, reassure markets, and reinforce operational stability will shape confidence in the sector’s long-term recovery,” she added.