Spirit Airlines files for Chapter 11 bankruptcy protection
Spirit Airlines, the nation's largest ultra-low-cost carrier, has filed for bankruptcy protection, the company announced Monday.
Facing significant financial headwinds, the Dania Beach, Florida-based airline said it has entered into Chapter 11 bankruptcy proceedings in an effort to "position the company for long-term success."
The move comes as Spirit has faced mounting debt, a major engine recall and shifting consumer preferences that have proved troublesome, of late, for budget airlines.
Importantly for passengers, all of Spirit's operations will continue during the proceedings — meaning travelers who have tickets booked on Spirit in the coming months should expect their flights to operate as planned.
"This set of transactions will materially strengthen our balance sheet and position Spirit for the future," said Ted Christie, Spirit president and CEO, in a statement announcing the news.
But the bankruptcy filing has also raised questions about where the airline is headed, long-term.
FAQ: Spirit Airlines' bankruptcy and how it might affect your travel
Spirit faces significant financial challenges
Monday's announcement came after months of speculation amid financial turmoil at the budget carrier.
An array of problems
Spirit has faced myriad financial hurdles in recent years, dating back to the start of the coronavirus pandemic. The airline has racked up billions of dollars in debt, more than $1 billion of which was coming due soon.
Earlier in 2024, the airline saw a federal court block its planned merger with JetBlue — a scuttled deal that followed failed merger talks with budget airline competitor Frontier Airlines.
The airline's fleet has also been disproportionately affected by an engine recall affecting a wide range of airlines and aircraft worldwide, which has forced the carrier to pull jets out of service for periods of prolonged maintenance.
That, along with an ultracompetitive domestic landscape that cut into airlines' profitability, has contributed to Spirit slashing dozens of routes over the course of this year.
Industry headwinds
Meanwhile, Spirit has also fallen victim to industry trends that have negatively affected a handful of budget airlines in recent years. After low-cost carriers enjoyed widespread success in the 2010s, the larger network airlines — most notably Delta Air Lines and United Airlines — have led U.S. airline industry profitability since the pandemic.
"The airline industry as a whole is facing significant challenges, including rising operational costs, changing consumer preferences and fluctuating demand, and we are not immune to them," Spirit noted Monday.
This summer, the carrier announced sweeping changes to its product offerings as a way to boost its earnings, as customers have flocked to airlines with premium seat options in recent years. Spirit revamped how it presents and sells its tickets and add-on bundles, and repackaged its Big Front Seat into a new "business class" offering. The carrier, like Frontier, also dropped its longstanding change and cancellation fees on most tickets.
Bankruptcy filing widely predicted
Despite making changes, numerous industry observers foresaw Monday's move.
In late September, for instance, Deutsche Bank analyst Michael Linenberg predicted Spirit's eventual bankruptcy filing, likening its projected financial losses to "taking cash and just lighting it on fire."
"They are going to do restructuring, for sure. They have to," Linenberg said while speaking at the 2024 Regional Airline Association Leaders Conference in Washington.
"I'm not sure if it's in court, or out of court," Linenberg added at the time. "But as a result of that, they will shrink."
What if you have flights booked on Spirit?
In an open letter to customers Monday, Spirit sought to quell its flyers' fears.
Even as the bankruptcy proceedings play out, customers can continue to book flights on Spirit using cash or frequent flyer miles, executives said. And the airline expects to operate as planned during the critical upcoming holiday period.
"You can continue to benefit from our Free Spirit loyalty program, Saver$ Club perks and credit card terms," the company wrote.
Eyeing early 2025 exit
Spirit expects to exit bankruptcy proceedings by the end of the first quarter of 2025, the company said Monday.
That timeline sounds realistic given that Spirit has entered into a "prearranged" Chapter 11 process, said Steve Walt, professor at the University of Virginia School of Law — meaning the company already reached a deal with its creditors prior to the bankruptcy filing.
"They've come to a deal, they've solicited the votes, there's a plan that has been distributed to the various claimholders and equity holders, and they have voted," Walt said.
"Customers, in principle, would not feel any impact," he added.
Long-term questions remain
Still, questions remain over what Spirit will look like down the road, even as the airline insists business will continue as usual in the short term.
Some industry analysts predict the airline could continue to slash the number of routes it operates, following a trend seen over the course of 2024.
"The question going forward will be how much smaller will Spirit be on the other side of the Chapter 11 process and where will the assets go," wrote Conor Cunningham of Melius Research in a report Monday.
Additionally, Spirit could also look, once again, to merge with another airline — or sell some of its assets, Cunningham noted. (Citing sources familiar with the matter, the Wall Street Journal last month reported Spirit and Frontier had reignited merger talks, only to later have those talks fall apart).
Spirit currently has 182 aircraft in its fleet, and an additional 31 in storage, according to data from aviation analytics firm Cirium. That includes 155 Airbus A320 jets, 56 A321s, and two A319s.
Bottom line
While news of the bankruptcy might be unsettling to Spirit customers, there's a strong precedent of big U.S. carriers continuing to fly largely as normal during bankruptcy proceedings.
Many of the largest U.S. carriers have gone through bankruptcy proceedings this century — American Airlines being the most recent, culminating with its merger with US Airways, which closed in 2014. Delta Air Lines and United Airlines each declared bankruptcy in the 2000s, also going on to merge with major rivals and emerge as stronger, leaner competitors.
Related reading:
- When is the best time to book flights for the cheapest airfare?
- The best airline credit cards
- What exactly are airline miles, anyway?
- 6 real-life strategies you can use when your flight is canceled or delayed
- Maximize your airfare: The best credit cards for booking flights
- The best credit cards to reach elite status
- What are points and miles worth? TPG's monthly valuations