Spirit Airlines filed for bankruptcy protection on Monday due to rising losses, overwhelming debt, heightened competition, and failed attempts to merge with other airlines.
Despite this, the airline will continue operating and assured customers that they could still book flights, use tickets, credits, and loyalty points as usual.
Bankruptcy filings are common among U.S. airlines, many of which have emerged financially stronger, including American, United, and Delta.
Spirit plans to emerge from bankruptcy next year with reduced debt and more financial flexibility, aimed at improving long-term success and enhancing the customer experience.
Additionally, creditors have agreed to provide $300 million to support the airline through this restructuring phase.
However, there is a possibility that Spirit might be acquired by another airline or face liquidation, as has happened with other airlines in the past.
Spirit had previously attempted mergers with Frontier Airlines and JetBlue Airways, but the latter deal was blocked due to antitrust concerns.
The bankruptcy filing could also lead to higher fares across the industry, as Spirit’s low-cost model had forced larger carriers to offer no-frills options.
If Spirit scales back operations or shuts down, the pressure to offer affordable fares may ease. A merger with a larger airline could be more likely now, as the risk of liquidation would pressure the Justice Department to consider it more favorably.
Spirit is restructuring its debt, which is due in 2025 and 2026, and it had $3.1 billion in long-term debt. As part of the bankruptcy process, the airline expects to be delisted from the New York Stock Exchange, with its stock value likely to be canceled.
Spirit’s low-cost model, which charges extra for many services, led to customer dissatisfaction, with Spirit and Frontier ranking lowest in passenger satisfaction surveys.
Additionally, Spirit’s financial struggles continued in 2023, reporting $360 million in operating losses for the first half of the year, nearly four times more than in the same period of 2023.
To reduce costs, Spirit has sold 23 Airbus jets, delayed aircraft deliveries, furloughed pilots, and plans further staff reductions in January.
