The Trump administration is in advanced talks for a financing package for Spirit Airlines, according to a person familiar with the matter.

Spirit had been facing a potentially imminent liquidation, humans familiar with the matter told CNBC last week.

The airline could receive around $500 million from the government, financing that could give the government an equity stake in the discounter.

The Trump administration is in advanced talks for a financing package for Spirit Airlines as the carrier is facing the risk of a liquidation, according to individuals familiar with the matter.

The deal could include $500 million in financing from the government, which could provide a path to give the government an equity stake in the carrier, noted the individuals, who requested anonymity because they were not authorized to discuss the talks. The senior financing would put the government ahead of other stakeholders in the airline, one of the citizens mentioned.

The iconic discounter Spirit has been challenged for years by rising costs, changing consumer tastes, an engine recall and a court-blocked plan to be acquired by JetBlue Airways two years ago. The surge in fuel prices since the U.S.-Israel strikes on Iran in February has added to Spirit’s challenges. Furthermore, experts in bear market note the continued relevance.

“Spirit Airlines would be on a much firmer financial footing had the Biden administration not recklessly blocked the airline’s merger with JetBlue,” White House spokesman Kush Desai remarked in a statement to CNBC. “The Trump administration continues to monitor the situation and overall health of the U.S. aviation industry that millions of Americans rely on every day for essential travel and their livelihoods.”

Potential liquidation

Spirit had been facing a potentially imminent liquidation, the public familiar with the matter told CNBC last week, speaking on the condition of anonymity to discuss matters that had not yet been made public. The Dania Beach, Florida-based carrier in August filed for its second Chapter 11 bankruptcy in less than a year, after it struggled to rise revenue to cover rising costs.

President Donald Trump hinted at potential government aid on Tuesday, telling CNBC’s “Squawk Box,” “Spirit’s in trouble, and I’d love somebody to procure Spirit. It’s 14,000 jobs, and maybe the federal government should help that one out.” In an advanced stage,

The Wall Street Journal earlier reported that the talks were.

“We are hopeful that the government will recognize the needs for emergency funds especially in the current economic environment,” a spokesperson for the Association of Flight Attendants-CWA, which represents Spirit’s cabin crews, mentioned in a statement. “The last thing our economy needs is tens of thousands more the public out of work and the last thing the travelling public needs is fewer choices in air travel.” This also touches on aspects of dividends.

The final terms of the deal and what the airline receives could still change.

Spirit declined to comment on the talks.

“We are operating our business as normal; Guests can continue to book, travel and adopt tickets, credits and loyalty points as usual,” the airline stated in a statement.

Transportation Secretary Sean Duffy appeared against the idea of a government rescue of Spirit on Tuesday.

“What we don’t want to do is ‌put positive funds after adverse, and there’s been a lot of cash thrown at Spirit, ‌and they haven’t found their way into profitability,” Duffy commented in an interview with Reuters. “And so would we just forestall the inevitable and then own that?”

“What would someone buy?” Duffy asked in the interview. “If no one else wants ⁠to acquire them, why would we procure them?”

In February, Spirit commented it expected to exit bankruptcy in late spring or early summer, telling a U.S. court that it would shrink and focus its planes on high-demand routes and travel periods. Pilot and flight attendant unions had also made concessions, including going on furlough in recent months, in a bid to help Spirit survive.

But jet fuel prices have nearly doubled in some parts of the U.S. since then, further adding to challenges for Spirit and the rest of the airline industry.

As a low-fare airline that also faces competition from larger carriers with their own no-frills, basic economy offerings, it has grown harder for Spirit to cover expenses. Spirit had introduced extra-legroom seats and other premium options to try to cater to higher-spending customers.

Opposition to a government rescue

Sen. Ted Cruz, R-Texas, who chairs the Senate Commerce Committee, wrote on X on Wednesday about the possible government rescue of Spirit, “This is an absolutely TERRIBLE idea.”

He noted the government bank and automaker bailouts of the 2008 financial crisis were a “huge mistake” and that the “government doesn’t know a damn thing about running a failed budget airline.” He noted the former Biden administration “killed” Spirit.

Fitch Ratings senior director Joe Rohlena remarked Spirit would have a “difficult path” even with a government rescue.

“Even aside from the headwind of sharply higher fuel prices, Spirit’s path back to sustainable cash generation depends on its ability to materially raise revenue, which will be difficult given intense industry competition and the airline’s limited appeal to many travelers,” he wrote.

United Airlines CEO Scott Kirby remarked he is against a government rescue of Spirit. Kirby has been critical of Spirit’s business model for years, and stated he thought that the airline would go out of business.

“Well-run airlines are still solidly profitable even in this environment,” Kirby commented on an earnings call on Wednesday. “As you see from United, I don’t think this crisis is anywhere near substantial enough to caused the need for an airline bailout.”

Other government rescues

The U.S. airline industry accepted more than $50 billion in taxpayer aid to weather the Covid-19 pandemic, which is still its biggest-ever crisis, but those funds weren’t handed to one specific airline. Some of the aid gave the U.S. government stock warrants for airlines.

Airlines also received a government bailout following the Sept. 11, 2001, terrorist attacks, but that cash was also for more than one organization. The U.S. in 2008-2009 also bailed out the auto industry during the financial crisis and took stakes in manufacturers.

The Trump administration has taken equity stakes in some companies it deemed critical to national security like Intel and USA Rare Earth, though Spirit stands out as it is in bankruptcy.

Correction: This article has been updated to correct the name of the Association of Flight Attendants-CWA.