The defunct budget airline was approved last week to begin marketing its takeoff and landing privileges at LaGuardia by Judge Sean H. Lane of the US Bankruptcy Court for the Southern District of New York. With about $8.1 billion in debt and roughly 17,000 laid off employees, Spirit is under pressure to maximize sale proceeds.
A successful sale to the “highest and best” bidder will navigate conflicting goals among creditors, government agencies, and Spirit, which shut down on May 2 amid surging fuel prices and failed financing talks. The airline has shifted from reorganizing to liquidation within its second Chapter 11 in two years.
Spirit’s attorneys and lenders with liens on the slots have warned that regulatory complexity makes their value, estimated at potentially $86.7 million, hard to predict.
“‘Highest and best’ is often - mistakenly - interpreted to mean the most dollars,” Ted Gavin, managing director of turnaround and restructuring firm Gavin/Solmonese LLC, said in an email. “That may account for highest, but ‘best’ also gets a role in the process, and that’s where the public interest comes into play.”
Bids are due June 30, with an auction set for July 9.
Spirit attorney Marshall S. Huebner of Davis Polk & Wardwell LLP at a June 10 court hearing said the airline has tied some executive bonuses to the price they get for the slots because of lender concerns over regulatory complexity.
“There is a nontrivial risk that number is zero and that it’s very important to many creditors that there be a recovery on that and that we essentially make it through the labyrinth,” Huebner said at the hearing, adding that he’s talking with regulators about the sale.
Regulatory Pressure
US Federal Aviation Administrator Bryan Bedford told reporters last month that the slots should go to a low-cost carrier or be retired.
Port Authority of New York & New Jersey Executive Director Kathryn Garcia told Bedford that Spirit’s shutdown will have an “acute impact” on the region and asked for a meeting to discuss redistribution of Spirit’s capacity, according to a May 8 letter obtained by Bloomberg Law.
Garcia said Port Authority airports have lost service to 29 domestic markets compared to 2024. She recommended redistribution based on competition, access, and focus on underserved markets instead of optimizing for dominant carriers.
“Airlines have realigned their networks and upgauged aircraft, providing them with consistent revenue, while customer choice is stifled and airfares remain elevated,” Garcia wrote.
The Port Authority told the bankruptcy court that winning rights to FAA runway slots isn’t enough. Any buyer must also take over Spirit’s lease for Terminal A, the Marine Air Terminal, and cure all defaults. If a buyer that doesn’t use Terminal A, flights will be forced into Terminals B and C, causing crowding in parking, roadways, and requiring more security measures, the agency said.
Moving operations away from Terminal A would also reduce Port Authority rental income as it manages an $8 billion LaGuardia transformation.
Slot Interest
JetBlue said in a statement that it’s evaluating potential opportunities at LaGuardia, even as it’s “mindful of the significant costs associated with operating at New York-area airports.”
“For low-fare carriers to succeed and grow, they need an operating environment that supports their ability to offer affordable fares while maintaining reliable service,” JetBlue said. “We continue to believe that increasing competition and expanding access to low fares benefits travelers and the broader New York market.”
Toronto-based Porter Airlines, which as of 2025 had six slots at LaGuardia, said it’s also interested in more slots at the airport, but that’s contingent on the process for allocating them being defined. A spokesperson said the company couldn’t provide more details.
The Port Authority in its letter said several airlines, including Allegiant, Frontier, El Al, Arkia, and Etihad, are interested in expanding or entering the market at its airports.
LaGuardia is dominated by major legacy carriers. Delta operates 580 slots while American Airlines has 327, according to FAA data of the summer 2025 season.
Judges don’t like to be put in the position of making policy decisions, and a fight over the slots could force Lane to do that, said Tal Unrad, a partner at Saul Ewing LLP.
“It may be more cost effective for everyone to reach a deal that allocates the slots, rather than force a bid and objection process where the lower cost carriers are forced to argue why the big carrier’s bids cannot be the ‘best,’” Unrad said.
Highest v. Best
The bankruptcy court will apply a “highest and best” standard to evaluate bids, said Seth Lieberman, a bankruptcy attorney with Pryor Cashman. While “highest” is fairly straightforward dollar amount, the “best” element accounts for deal certainty, closing speed, and regulatory hurdles, he said.
Slots are ultimately operating privileges, said Stephanie Wickouski, a managing director of Pivot > Group. Even though the FAA has made its position clear, logical contenders for the slots still include larger legacy carriers like American Airlines, Delta, or United, along with smaller carriers, she said.
The slots could also be split among several carriers, though jurisdictional tensions could chill bidding or lower the price and proceeds, she said.
The court will balance public needs with those of Spirit’s estate while considering outside parties’ input and Spirit’s business judgment, Gavin said. Nonetheless, just because the Port Authority and FAA want low-cost carriers doesn’t mean they’ll get them, he said.
If a regulator determines a bidder is unsuitable, the court can’t insist that bidder receive the slot license, Mark Roe, a Harvard Law School professor, said in an email.
“If it’s in the FAA’s authority to knock out large carriers, then they can,” Roe said. “That’d be less good for creditors if the larger carriers would bid more.”