Spirit Airlines Seeks Bankruptcy Protection Amid Rising Losses

Spirit Airlines Files for Bankruptcy Protection After Struggles with Losses, Failed Merger, and Rising Costs

Spirit Airlines, a pioneer in budget air travel, has filed for bankruptcy protection following years of mounting losses, a failed merger attempt, and increased pressure from changing consumer preferences.

In a filing early Monday, the airline announced a prearranged deal with its bondholders, securing $300 million in debtor-in-possession financing to support its operations during the bankruptcy process. Spirit expects to emerge from Chapter 11 by the first quarter of 2024. The airline assured customers and stakeholders that daily operations will continue as usual, with no impact on vendor payments or aircraft leases.

“We want to reassure our customers that they can continue to book and fly with us, including using tickets, credits, and loyalty points,” said Spirit CEO Ted Christie in a letter to customers. “We remain committed to providing low-cost travel as we navigate this process.”

Spirit, based in Dania Beach, Florida, is the first major U.S. airline to file for Chapter 11 since American Airlines in 2011. The carrier had faced several challenges, including an engine recall that grounded dozens of planes, surging operational costs post-pandemic, and a failed merger with JetBlue Airways that was blocked by a federal judge earlier this year on antitrust grounds. Spirit’s stock has dropped more than 90% in 2024 alone.

The airline also faced mounting pressure from a $1.1 billion debt repayment due next year, which it had been negotiating with its credit card processor. Spirit’s restructuring plan includes a deal with bondholders for $350 million in equity and a move to eliminate $795 million of its debt.

As part of the filing, Spirit will be delisted from the New York Stock Exchange. The airline reported significant financial struggles in the third quarter, including a drop in margins and a $61 million revenue shortfall compared to last year. Spirit has not posted a profit since 2019 and lost over $335 million in the first half of 2024.

To raise capital, Spirit has sold off several jets, including 23 Airbus planes to GA Telesis for $519 million. It plans to end the year with around $1 billion in liquidity but will also furlough an additional 330 pilots in January after cutting routes. Analysts suggest that further downsizing may be necessary for Spirit to regain financial stability.

Known for its ultra-low-cost model, Spirit’s no-frills service revolutionized the airline industry, sparking similar offerings from larger carriers. However, the pandemic led to rising costs and shifting travel habits, forcing the airline to adapt. This year, Spirit began offering bundled fares and premium seating options as part of a strategy to appeal to more travelers seeking additional comfort.

The airline’s troubled path also included a proposed merger with Frontier Airlines in 2022, which was ultimately overshadowed by a bid from JetBlue. Spirit shareholders had backed the JetBlue acquisition, but a judge blocked the deal, citing concerns over reduced competition and higher fares.

While Spirit navigates its bankruptcy, there may be future opportunities for a merger, with some analysts speculating that Frontier and Spirit could revisit talks once the company completes its restructuring.