WASHINGTON, May 2 - Bankrupt low-cost airline Spirit Airlines ceased operations on Saturday, becoming the first airline failure tied to the ongoing Iran war, after it was unable to win creditor backing for a proposed U.S. government rescue package.

The shutdown marks the first airline collapse linked to the sharp rise in jet fuel prices during the two-month conflict, a development that will eliminate thousands of jobs. The failure also represents a setback for President Donald Trump, who had put forward a $500 million plan to keep Spirit afloat despite resistance from some advisers and numerous Republican lawmakers.

No U.S. airline of Spirit’s scale — at one point responsible for about 5% of domestic flights — has liquidated in the past twenty years. The carrier was known for driving down ticket prices in markets where it competed with larger airlines.

A meeting of Spirit’s board ended without a deal to save the company, according to a person familiar with the discussions late Friday.

“Despite our efforts, the recent and substantial rise in oil prices along with additional operational pressures have severely affected Spirit’s financial position,” the company said in a statement announcing an “orderly wind-down of operations.”

All flights have been canceled, Spirit confirmed, advising customers not to travel to airports.

Between May 1 and May 15, Spirit had been scheduled to operate 4,119 domestic flights, representing more than 800,000 available seats, according to aviation analytics data.

A company spokesperson said Spirit informed the Federal Aviation Administration before halting service and declined further comment.

Airlines worldwide have been grappling with soaring jet fuel costs after military strikes involving the United States and Israel disrupted shipping routes through the Strait of Hormuz. Spirit had already been struggling financially before fuel prices surged.

The airline built its identity around ultra-low fares aimed at price-sensitive travelers willing to forgo extras such as checked baggage and seat selection.

Following the COVID-19 pandemic, however, consumer preferences shifted toward comfort and premium travel experiences, leaving ultra-low-cost carriers facing declining demand and mounting challenges.

Spirit’s closure is expected to benefit competitors such as JetBlue Airways and Frontier Airlines, even as they confront higher fuel expenses themselves. Spirit’s over-the-counter shares fell sharply on Friday, while Frontier and JetBlue both posted gains.

President Trump said Friday that the White House had presented a final rescue proposal to Spirit and its creditors after negotiations stalled over the $500 million financing plan designed to sustain operations through bankruptcy.

“If we can help, we will — but it has to make sense for us,” Trump told reporters. “We would act if it’s a good deal.”

The airline’s downfall highlights how the fuel price shock from the Iran conflict has disproportionately impacted financially weaker carriers.

Spirit’s restructuring blueprint had projected jet fuel prices of roughly $2.24 per gallon in 2026 and $2.14 in 2027. By the end of April, however, prices had climbed to about $4.51 per gallon, making survival impossible without significant new funding.

Transportation Secretary Sean Duffy said efforts were made to find another airline willing to acquire Spirit, but no buyer emerged. “What exactly would they be purchasing?” Duffy said. “If no private buyer sees value, why should the government?”

A creditor involved in discussions said the administration made an exceptional attempt to rescue the airline but concluded that its financial condition was beyond repair. The creditor added that clarity was necessary for the sake of employees and passengers.

Spirit had previously negotiated an agreement with lenders that would have enabled it to exit its second bankruptcy by late spring or early summer. Those plans unraveled after the war-driven spike in fuel costs disrupted its financial forecasts and complicated its restructuring strategy.

In February, the airline carried about 1.7 million domestic passengers, representing a 3.9% share of the U.S. market, down from 5.1% a year earlier, according to industry data.

After Spirit announced its shutdown, major U.S. airlines introduced special fares and capacity adjustments for displaced travelers. Frontier unveiled broad discounts and additional summer routes. JetBlue promoted limited-time $99 fares. Southwest introduced special pricing, United capped one-way ticket prices, and American added rescue fares while reviewing plans to increase service on key routes.

Last month, President Trump stated that his administration would consider purchasing the struggling airline at what he described as the “right price.”

According to sources, the administration had proposed $500 million in financing in exchange for warrants representing 90% of Spirit’s equity.

There were internal disagreements within the administration over whether and how the bailout should proceed, according to individuals familiar with the discussions.