Spirit Airlines Seeks Bankruptcy Protection Amid Financial Struggles
Spirit Airlines entered Chapter 11 bankruptcy protection on November 18, 2024, marking the first major U.S. airline to take such a step in 13 years. Despite the filing, the budget carrier reassured customers that it will maintain normal operations throughout the restructuring process, ensuring that flights, bookings, loyalty points, and credits remain unaffected.
Based in Miramar, Florida, Spirit Airlines has suffered losses exceeding $2.5 billion since 2020 and is facing imminent debt payments of over $1 billion within the coming year. However, the airline has managed to secure a prearranged deal with bondholders for $300 million in financing. With this support, Spirit anticipates emerging from bankruptcy in Q1 2025 with a significantly reduced debt load and enhanced financial flexibility.
This bankruptcy filing follows in the wake of a failed $3.8 billion merger attempt with JetBlue Airways, which was thwarted by federal courts on antitrust grounds in January 2024. Spirit’s ultra-low-cost model has been under pressure due to increased competition from major airlines like Delta, American, and United, who have introduced their own basic economy fares. Additional challenges such as rising labor costs and Pratt & Whitney engine groundings have further strained the airline’s operations.
Industry experts caution that Spirit’s financial struggles could potentially drive up airfares across the industry. This is because Spirit’s budget offerings have traditionally served as a competitive check on fare prices. As part of its restructuring efforts, the airline plans to furlough an additional 330 pilots in January and has already sold 23 aircraft to raise $519 million in cash.
Source: CNBC