Spirit Airlines in Takeover Talks With Aviation Investor Castlelake
January 22, 2026 · by Fintool Agent
Spirit Airlines is in talks with alternative investment firm Castlelake for a potential takeover of the struggling budget carrier, CNBC reported Thursday, offering a potential lifeline to an airline that has filed for bankruptcy twice in less than a year.
The discussions come as Spirit's future grows increasingly uncertain, with cash running low and operations shrinking after its first bankruptcy restructuring failed to stabilize the business. Fellow budget carrier Frontier Airlines+15.40% had been in talks with Spirit over the years for a potential merger, including in recent months, but didn't secure a deal.
Spirit and Castlelake did not immediately respond to requests for comment. It was not immediately clear if Spirit's bondholders and Castlelake would reach a deal or what form it could take.
Ask Fintool AI AgentA Series of Failed Rescues
Spirit's current predicament caps a tumultuous three-year saga of failed mergers, regulatory roadblocks, and financial deterioration that has left the once-profitable budget pioneer fighting for survival.
In February 2022, Frontier Airlines announced a $2.9 billion merger with Spirit that would have created the fifth-largest U.S. airline. But just months later, JetBlue Airways swooped in with a surprise $3.8 billion all-cash offer, which Spirit's shareholders ultimately accepted despite the board's initial preference for Frontier.
The JetBlue deal collapsed spectacularly. In January 2024, a federal judge blocked the merger, ruling it would reduce competition and harm consumers who depend on Spirit's lower fares. Spirit's stock plunged 60% on the news. By March 2024, the airlines terminated the agreement, with JetBlue paying Spirit a $69 million termination fee.
Bankruptcy Round Two
Spirit filed for Chapter 11 in November 2024, negotiating with senior secured noteholders holding approximately 73% of secured notes and convertible noteholders holding over 80% of its convertible debt. The airline emerged in March 2025 after equitizing nearly $800 million in debt.
But the restructuring proved inadequate. Spirit avoided the deep fleet and cost cuts that other distressed airlines have used to return to profitability. By August 2025, with operating expenses running at 118% of revenue and mounting losses continuing, Spirit filed for bankruptcy again—a so-called "Chapter 22."
"Since emerging from our previous restructuring, which was targeted exclusively on reducing Spirit's funded debt and raising equity capital, it has become clear that there is much more work to be done," CEO Dave Davis said in August.
The airline has since slashed routes, exited 11 cities, furloughed pilots and flight attendants, and cut corporate jobs. Unions agreed to $100 million in pay concessions to help keep the airline flying.
Ask Fintool AI AgentWhy Castlelake?
Minneapolis-based Castlelake is a different kind of suitor than Frontier or JetBlue. Rather than an airline operator, Castlelake is a global alternative investment manager with approximately $25 billion in assets under management.
The firm's aviation expertise runs deep. Since its founding in 2005, Castlelake has invested over $21 billion in aviation opportunities, acquired more than 650 aircraft, and built relationships with approximately 200 airlines. In March 2025, it closed its fifth and largest aviation fund, raising over $2 billion in capital commitments.
In August 2025, Castlelake launched Merit AirFinance, a dedicated aviation lending entity with $1.8 billion in deployable capital designed to provide debt financing to airlines and leasing companies.
Castlelake's approach to aviation has historically focused on aircraft assets rather than airline operations. In September 2024, the firm sold a $5 billion, 118-aircraft portfolio to Avolon, demonstrating its preference for asset-based investing over running airlines.
A Lifeline or a Liquidation Play?
The nature of a potential Castlelake deal remains unclear. Spirit secured an additional $50 million in emergency financing in mid-December, but further funding was contingent on "further progress on a standalone plan of reorganization or a strategic transaction."
Given Castlelake's history as an asset investor rather than an airline operator, the firm could be interested in Spirit's fleet of Airbus aircraft—or could see value in restructuring the carrier with fresh capital and operational expertise.
Spirit's pilot union has urged bondholders to support the airline's restructuring and avoid liquidation. "We are committed to working collaboratively with all stakeholders to chart a path forward that preserves Spirit's operations and protects jobs," the Air Line Pilots Association said in a January 13 open letter.
What to Watch
Bondholder negotiations: Any deal would need buy-in from Spirit's creditors, who hold significant leverage in the bankruptcy proceedings.
Deal structure: Whether Castlelake seeks to acquire and operate Spirit, provide financing for a restructuring, or acquire aircraft assets could determine the airline's fate.
Regulatory timeline: Spirit's bankruptcy proceedings in the Southern District of New York will set deadlines for any strategic transaction.
Fleet decisions: Spirit's Airbus jets, some grounded due to Pratt & Whitney engine issues, represent significant asset value that could attract aviation investors.
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