DANIA BEACH, USA – Spirit Airlines announced on Monday, November 18, 2024, that it has filed for Chapter 11 bankruptcy protection following years of mounting financial challenges, including rising debt, operational losses, and a blocked merger with JetBlue Airways earlier this year.
The low-cost carrier, headquartered in Dania Beach, Florida, has secured a prearranged deal with its bondholders to keep operations afloat during the bankruptcy process.
The agreement includes $300 million in financing and an equity investment commitment of $350 million from bondholders, equating to $795 million of outstanding debt.
Spirit expects to emerge from bankruptcy by the first quarter of 2025, the company said in a statement.
Operations to Continue as Normal
Despite the bankruptcy filing, Spirit assured customers that ticket sales, flights, and all other operations would continue without disruption, even as millions prepare to travel over the Thanksgiving holiday.
“The most important thing to know is that you can continue to book and fly now and in the future,” Spirit CEO Ted Christie said in a letter to customers.
He described the bankruptcy as part of a comprehensive recapitalisation plan backed by a “supermajority” of bondholders.
“This is a strong vote of confidence in Spirit and our long-term plan,” Christie added.
Challenges Leading to Bankruptcy
Spirit Airlines, which was last profitable in 2019, has faced numerous obstacles in recent years. Among them:
- Blocked Merger: In January 2024, a U.S. District Court judge halted a proposed $3.8 billion merger with JetBlue Airways, citing antitrust concerns. The merger was seen as a lifeline for Spirit, but its collapse left the airline grappling with limited options for financial recovery.
- Engine Recall: An engine recall in 2023 compounded operational difficulties, leading to increased costs and disruptions.
- Debt and Job Cuts: The airline deferred $1.1 billion in debt payments earlier this year and announced plans to sell 23 older planes and cut jobs, aiming to save $80 million.
These challenges, coupled with a broader post-pandemic travel slump, created what industry analysts described as insurmountable pressures on Spirit’s financial structure.
Stock Market Impact
Ahead of the bankruptcy filing, Spirit’s stock price plummeted from $3.22 to $1.15 last week following a Wall Street Journal report on the impending bankruptcy.
Shares closed at $1.07 on Friday.
As part of its restructuring plan, Spirit intends to stabilise its finances and focus on regaining profitability by early 2025.
The company plans to leverage its agreement with bondholders to sustain operations and reduce outstanding debt.
Industry Outlook
Spirit’s filing marks a significant moment for the airline industry, particularly for budget carriers that have struggled to adapt to post-pandemic shifts in travel demand.
While passenger numbers have rebounded in 2024, many airlines have faced increased operational costs, fuel price volatility, and heightened competition.
The coming months will determine whether Spirit’s restructuring efforts can position the airline for long-term survival or whether it will need further strategic shifts to remain viable in a challenging industry landscape.
