Spirit Airlines is in discussions with investment firm Castlelake over a possible takeover of the bankrupt carrier, reported Reuters.

Frontier Airlines had previously explored a merger with Spirit but failed to secure a deal. Spirit's future remains uncertain as cash runs low during bankruptcy proceedings that began in August, marking its second filing in less than a year.

Sources said it was unclear whether Spirit's bondholders and Castlelake would reach an agreement or what form it might take. Castlelake last August launched Merit AirFinance, an aviation lending platform backed by US$1.8 billion to finance airlines and aircraft lessors.

Spirit declined to comment, while Castlelake did not immediately respond. Spirit has faced repeated failed merger attempts since 2022, including a cash-and-stock deal with Frontier that collapsed after a rival bid from JetBlue Airways. A federal court blocked that transaction on antitrust grounds in January 2024.

Known for its bright yellow Airbus fleet and ultra-low-cost fares, Spirit struggled after the pandemic as passengers shifted towards comfort-focused travel. The airline has faced declining demand and difficulty adapting to new market conditions.

In December, Spirit secured $100 million in emergency financing to sustain operations and restructuring under court protection.