Spirit Airlines, the nation's largest low-cost airline, has filed for Chapter 11 bankruptcy protection, aiming to restructure its substantial debt and address the challenges of a fiercely competitive airline industry. The Miramar, Fla.-based airline has reported more than $2.5 billion in losses since 2020 and faces more than $1 billion in debt payments due over the next two years.
Despite filing for bankruptcy, Spirit plans to maintain normal operations, assuring passengers that flight reservations and loyalty programs will continue without interruption. The airline has secured a $350 million equity investment and will convert $795 million of debt into equity, supplemented by a $300 million loan to support restructuring efforts.
The COVID-19 pandemic has had a significant impact on Spirit's financial health, with a slower recovery in passenger demand compared to other carriers. Increased competition from major airlines offering discount fares and rising operational costs have further strained the airline's finances. Additionally, necessary engine repairs grounded many Spirit jets, exacerbating operational problems.
Earlier this year, Spirit's proposed merger with JetBlue Airways was blocked by a federal judge on antitrust grounds, eliminating any chance of financial stability. Subsequent merger negotiations with Frontier Airlines also failed, leaving Spirit to explore other restructuring options.
As part of its restructuring strategy, Spirit announced plans to reduce its flight schedule by nearly 20% in the coming months, with the aim of stabilizing its operations and improving its financial performance. The airline plans to emerge from bankruptcy in early 2025, focusing on reducing debt and improving customer value.
Spirit's bankruptcy filing marks the first major bankruptcy of a U.S. airline since American Airlines in 2011.
