- Spirit Airlines CEO said customers can continue to book tickets on the airline.
- Spirit has struggled since its failed acquisition by JetBlue Airways, the Pratt & Whitney engine recall and weaker-than-expected sales.
- The company has faced mounting losses and faced a deadline to renegotiate $1.1 billion in debt payments due next year.
Spirit Airlinesa low-cost airline icon that reshaped the industry, filed for bankruptcy protection after years of mounting losses, a failed merger and more demanding consumer tastes.
The carrier said Monday morning that it had reached an advance agreement with its bondholders, including $300 million in debtor-in-possession financing. He said aircraft sellers and lessors would not be affected.
The airline said it plans to continue operating as normal and its customers can continue to book. It said it plans to emerge from bankruptcy protection in the first quarter of next year.
“The most important thing to know is that you can continue to book and travel now and in the future,” Spirit CEO Ted Christie said in a letter to customers Monday. He said customers can use their tickets, credits and loyalty points “as usual”.
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% since the start of the year.
Spirit is the first major U.S. airline to file for Chapter 11 since American Airlines 13 years ago.
The airline had repeatedly postponed a deadline with its credit card processor to renegotiate $1.1 billion in debt due next year or risk losing the ability to process those transactions.
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 “lead to the cancellation of the company's existing equity.”
Spirit said in its filing that it expects its third-quarter margins to be 12 percentage points lower than the same period last year and sales to be $61 million lower than those of last year, while costs have increased and rates have fallen.
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.
The way of the Spirit
Spirit's business model of offering ultra-low fares and fees for everything from seat assignments to carry-on bags has been a hit with bargain-hunting customers, allowing it to expand into more of a decade.
His simple serve has become one of stand-up comics' favorite punchlines. A greeting map featuring one of the carrier's yellow planes 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 more for roomier seats on board.
In January, a federal judge blocked JetBlue service $3.8 billion planned acquisition of Spirit. Spirit had already entered into a merger agreement with another low-cost airline. Border before JetBlue stepped in with an offer in April 2022. 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.
