Spirit Airlines announced that it’s filed for Chapter 11 bankruptcy. The move aims to restructure its overwhelming debt burden.
The filing comes after two collapsed merger efforts within two years – one with Frontier Airlines and another with JetBlue – leaving the budget carrier grappling with persistent financial setbacks and repeated quarterly losses – it hasn’t reported a quarterly profit in over 3 years.
By the time it filed, Spirit reported debts of $9 billion.
While many airlines have recovered since the pandemic, Spirit has struggled to regain its footing.
Larger airlines quickly capitalized on increased demand for premium and international travel; sectors that Spirit doesn’t really compete in. In addition, these same airlines started to aggressively offer low-cost economy fares, directly competing with Spirit.
Operational issues have also been a problem. Spirit’s Airbus A320neo fleet were affected by manufacturing defects, forcing the airline to ground some of its fleet.
In an open letter to customers, the airline said fliers could “use all tickets, credits and loyalty points as normal.”
Ted Christie, Spirit’s President and Chief Executive Officer said in a news release: “I am pleased we have reached an agreement with a supermajority of both our loyalty and convertible bondholders on a comprehensive recapitalization of the Company, which is a strong vote of confidence in Spirit and our long-term plan.” Adding:
“This set of transactions will materially strengthen our balance sheet and position Spirit for the future while we continue executing on our strategic initiatives to transform our Guest experience, providing new enhanced travel options, greater value and increased flexibility. I’m extremely proud of the Spirit team’s hard work and dedication, which is key to our sustained progress in advancing our business and delivering for our Guests.”
As part of its prearranged Chapter 11 bankruptcy plan, Spirit has secured a $350 million equity investment from existing bondholders. These bondholders have also agreed to provide $300 million in debtor-in-possession (DIP) financing, which, along with available cash, will help fund operations during the bankruptcy process.
