The shutdown of Spirit Airlines has underscored a deepening crisis in the aviation industry, as soaring fuel prices linked to the conflict involving Iran begin to push weaker carriers out of the market.

The budget airline ceased operations over the weekend after failing to secure creditor backing for a last-minute rescue plan, becoming the first major casualty tied to the recent surge in global oil prices. The closure ends more than three decades of operations and leaves around 17,000 employees without work.

Spirit announced an “orderly wind-down of operations,” canceling all flights and urging passengers not to go to airports. “Unfortunately, despite the company's efforts, the recent material increase in oil prices and other pressures on the business have significantly impacted Spirit's financial outlook,” the airline said.

The company had been attempting to exit bankruptcy with support from lenders and a proposed $500 million U.S. government bailout backed by Donald Trump. However, talks collapsed after failing to gain approval from creditors.

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

Industry observers say the airline’s downfall reflects how quickly rising fuel costs can destabilize already fragile business models. Jet fuel prices, which make up a significant share of airline expenses, more than doubled in recent weeks, far exceeding the company’s earlier projections.

Chief executive Dave Davis said the spike in fuel costs left the company with limited options.

“Sustaining the business required hundreds of millions of additional dollars of liquidity that Spirit simply does not have and could not procure. This is tremendously disappointing and not the outcome any of us wanted,” Davis said.

Even before the latest cost shock, Spirit had been grappling with declining demand for ultra-low-cost travel, a failed merger attempt, and increasing competition. Once accounting for about 5 percent of U.S. flights, the airline had seen its market share shrink in recent months.

“For more than 30 years, Spirit Airlines has played a pioneering role in making travel more accessible and bringing people together while driving affordability across the industry,” Davis added.

Economist Mohamed El-Erian warned that the impact of the conflict could extend beyond a single airline.

“More generally, the war's spillovers, if not contained, risk pushing other fragile businesses over the edge and severely burdening vulnerable households and economies alike,” he said.

Spirit’s exit is expected to reshape competition in key routes, with rival carriers moving quickly to fill the gap. Airlines including JetBlue Airways and Frontier Airlines have already begun expanding services and offering discounted fares to absorb stranded passengers.

The collapse marks the largest U.S. airline liquidation in two decades and signals broader risks for the aviation sector, as geopolitical tensions and volatile energy prices continue to test the resilience of global carriers.