Spirit is in advanced talks with the federal government over financing to help it restructure and exit bankruptcy, with a potential $500 million in government-backed financing deal on the table, giving the U.S. a possible stake of up to 90% in the company. Spirit’s lawyer told bankruptcy court the airline needs new financing or access to $240 million by the end of next week, warning liquidation could eliminate more than 14,000 jobs.

Although gas almost doubling explains some pressure, it doesn’t explain how Spirit got here in the first place. Its restructuring plan assumed jet fuel at $2.24 per gallon in 2026, but thanks to the Iran war, prices had climbed to $4.32 as of April 16. Instead, Spirit’s problem is bigger than a fuel shock.

Nicholas Fox, a former Virgin Group communications executive who worked across Virgin’s airline and train businesses who now is a Senior Managing Director at Sloane PR, says Spirit lost something along the way that originally made no-frills flying work.

“They’ve lost their competitive difference, and they don’t really know where they are,” Fox told Fortune. “If you have a business that relies on really thin margins and doesn’t know what its difference is, it’s not going to survive.”

Europe is quite the contrast. Ryanair, easyJet, and Wizz Air operate in dense markets where cheap flights compete not only with flag carriers, but with other budget airlines, trains, buses, and short car trips. That ecosystem forces low-cost airlines to remain genuinely cheap, and gives the biggest players scale.

“In Europe, three of these big ultra-low-cost or low-cost carriers have got strong, dominant positions,” Fox said. “That gives them the moat, the barrier, the strength to withstand some of the buffeting they’re getting from high oil prices right now.”

Spirit never built the same safety net. U.S. routes are longer, airports are expensive, and legacy carriers now sell basic economy fares that compete directly with Spirit’s cheapest seats, all while offering loyalty programs, broader networks, and more reliable operations. Add in weak rail alternatives and a lack of political willpower to invest in other modes of transportation, and you have the perfect storm of little competition complicated with high costs that forces out any wannabe competitor.

“You once had a big enough discount that people were willing to say, ‘I’m going to save money. I’m going to get on Spirit. I’m going to fight for my seat,” Fox said, adding Spirit is squeezed between passengers who can get a bare-bones fare from a legacy airline and passengers willing to pay slightly more for a better experience. “Once you add a bag and all these other things going in, you were actually probably spending the same amount,” he said of Spirit’s extra fees compared to a base ticket on the top four (American, Delta, Southwest and United) with those amenities included.

That is where the European comparison comes in. Ryanair’s brand is not beloved (in fact, they’ve learned to make fun of that fact), but passengers know what they are buying. Same with easyJet, Wizz Air, and the myriad of Europe’s other ultra-low-cost carriers. The airlines’ cheapness is less a weakness and more, the product.

A potential bailout

The Justice Department blocked JetBlue’s planned $3.8 billion acquisition of Spirit in 2022, arguing the deal would have caused tens of millions of travelers to face higher fares and fewer choices. In a statement to Fortune, White House spokesperson Kush Desai seemed to place blame on Spirit’s current woes on that 2022 bid. “Spirit Airlines would be on a much firmer financial footing had the Biden administration not recklessly blocked the airline’s merger with JetBlue,” Desai said.

Now, Washington may have to decide whether preserving competition requires taxpayer-backed financing.

There is precedent for federal support of airlines, but the context matters, says Fox. The Covid-era Payroll Support Program awarded $59 billion in three rounds of assistance to the domestic aviation industry, while a separate CARES Act loan program provided about $2.7 billion in loans to 35 eligible businesses. After 9/11, the Air Transportation Stabilization Board was authorized to issue up to $10 billion in federal loan guarantees to air carriers that suffered losses from the attacks, and Treasury testimony said it ultimately issued six loan guarantees totaling $1.56 billion.

Fox draws a distinction between past airline bailouts and this one. “The bailouts that worked,” he said, “after 9/11 or Covid, happened across an industry,” he said. “This one is slightly different. This is brought on by kind of an economic business model failure.”

A rescue could preserve jobs and keep Spirit flying, maybe for now. But it won’t attain the same viability of being a low-cost carrier in Europe until the industry changes. European budget airlines work because they’re part of a broader low-cost travel ecosystem, where there is more competition between other airlines and other modes of transportation. In America, cheap flying was left to do too much on its own. And Fox says Spirit lost the one thing the differentiated it from the pack: being low-cost.

“If you don’t have the service, the feeling, the loyalty,” Fox said, “you’ve got to be bloody cheap.”