Spirit Airlines Files for Bankruptcy After Mounting Losses

Spirit Airlinesa budget airline icon that reshaped the industry, filed for bankruptcy protection after years of mounting losses, a failed mergerincreased competition and more demanding consumer tastes.

The carrier reached an agreed appointment early Monday agreement with its bondholders, including $300 million in debtor-in-possession financing, to help it weather the bankruptcy, which it said it expects to emerge in the first quarter of next year. Spirit said aircraft suppliers and lessors would not be harmed. Spirit listed its assets and liabilities at between $1 billion and $10 billion in a court filing.

The airline said it expects continue to operateand CEO Ted Christie have tried to reassure customers that they can still book, travel and use loyalty points with the carrier.

“The most important thing to know is that you can continue to book and travel now and in the future,” Christie said in a letter to customers Monday.

Spirit is the first major U.S. airline to file for Chapter 11 since American Airlines 13 years ago.

The Dania Beach, Fla.-based airline was grappling with a engine recall which grounded dozens of its planes, an increase in costs after the pandemic and the failure of its project acquisition by JetBlue Airwayswhich was blocked by a federal judge earlier this year on antitrust grounds. Its shares have fallen more than 90% this year.

The airline had repeatedly postponed a deadline with its credit card processor to renegotiate $1.1 billion in loyalty bonds due next year or risk losing the ability to process transactions.

It said Monday that it had reached an agreement with bondholders for $350 million in equity and that noteholders would exchange $795 million for equity. Spirit's shares will be delisted from the New York Stock Exchange following their filing in the U.S. Bankruptcy Court for the Southern District of New York.

Last week, Spirit said it had to delay its quarterly filing and said it was in discussions for a deal with a majority of creditors it would not affect customers, vendors, suppliers and others, but it would wipe out the company's existing equity.

Spirit had said it expected its third-quarter operating margins to be 12 percentage points lower than its negative 15% margin a year ago, due to rising costs and lower revenues. prices. Sales fell by $61 million.

The airline has not made a profit since 2019 and lost more than $335 million in the first half.

To try to make up the difference, it sold dozens of planes to consolidate its cash flow, which worked in its favor since planes are in short supply this year. Most recently, it sold 23 Airbus planes to GA Telesis to generate $519 million. Spirit said it expects to end the year with about $1 billion in cash.

The company also plans to furlough another 330 pilots in January, in addition to around 200 in September, as it reduced routes. But analysts expect the carrier will need to further reduce its bankruptcy to control costs.

Its simple service has become a favorite punchline for stand-up comics. A greeting map Featuring a drawing on one of the carrier's yellow planes, it even says: “I would fly Spirit Airlines for you.”

The low-cost, extra-fee model has attracted similar offers from major carriers like Delta, American And Unitedwho deployed basic economy rates.

However, Spirit struggled post-pandemic, when costs increased across the industry and the lifting of travel restrictions triggered a surge in international travel bookings outside of Spirit's network. Tariffs have fallen in an oversupplied U.S. market.

This summer, Spirit began offering bundled rates with seat assignments and other perks, as well as a sort of “first class” that included larger seats at the front of the plane, as many travelers opted to pay for roomier seats at edge.

In January, a federal judge blocked JetBlue service $3.8 billion planned acquisition of Spirit. In early 2022, Spirit reached an agreement to merge with another low-cost airline. Border before JetBlue stepped in with an offer in April of that year. Spirit shareholders supported JetBlue's all-cash offer.

Judge William Youngwho was appointed by former President Ronald Reagan, said the JetBlue deal would raise fares and reduce competition. Airlines have argued that this will help them be more competitive, particularly in the United States where four airlines control about three-quarters of the market.

“Spirit is a small airline. But there are those who love it,” Young wrote in his decision. “To those dedicated Spirit customers, this one’s for you.”

Some analysts expect Frontier and Spirit to resume negotiations in the coming months.