Spirit Airlines said Monday that it has filed for bankruptcy protection and will attempt to reboot as it struggles to recover from the pandemic-caused swoon in travel, competition from bigger carriers, and a failed attempt to sell the airline to JetBlue. (AP Photo/Charles Krupa, File),
Spirit Airines flights out of dozens of U.S. airports will continue without disruption over the Thanksgiving weekend and throughout its Chapter 11 bankruptcy proceedings, the discount carrier said in a statement Monday.
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The nation’s largest budget carrier sought bankruptcy protection to reboot its business after a string of quarterly losses and mounting debt, stiffer competition from bigger bare-bones carriers, rising labor costs, and a failed attempt to sell the airline to JetBlue.
The announcement came the same day AAA released its Thanksgiving travel forecast that calls for record travel this coming Thanksgiving holiday period, including about 5.73 million Americans who plan to fly to their destinations.
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Spirit customers can continue to book flights and use and accumulate loyalty miles as they normally would and employees and vendors will continue to be paid, the airline said in a statement.
In addition to 47 domestic destinations, Spirit Airlines also flies to and from destinations in Central and South America, and the Caribbean:
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Spirit has lost more than $2.5 billion since the start of 2020 and faces looming debt payments totaling more than $1 billion in 2025 and 2026.
The airline said it received commitments for a $350 million equity investment from existing bondholders and will convert $795 million of its debt into stock in the restructured company. The bondholders will also extend a $300 million loan that, combined with Spirit’s remaining cash, will help the airline get through the restructuring.
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CEO Ted Christie called the deal with bondholders “a strong vote of confidence in Spirit and our long-term plan.”
Although Spirit’s traffic grew 2 percent in the first six months of 2024 compared to the same period in 2023, travelers are paying about 10 percent less per mile, and revenue per mile from fares is down nearly 20 percent, contributing to Spirit’s red ink.
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The trend is not new. The Dania Beach, Florida-based failed to return to profitability when the coronavirus pandemic eased and people began traveling more.
Spirit’s costs, especially for labor, have risen. The biggest U.S. airlines have snagged some of Spirit’s budget-conscious customers by offering their own brand of bare-bones tickets. And fares for U.S. leisure travel — Spirit’s core business — sagged this summer because of a glut of new flights.
The premium end of the air-travel market has surged while Spirit’s traditional no-frills end has stagnated. So this summer, Spirit decided to sell bundled fares that include a bigger seat, priority boarding, free bags, internet service and snacks and drinks. It also dropped cancellation fees after rival Frontier Airlines did so.
Those were huge changes from Spirit’s longtime strategy, which focuses on grabbing customers with rock-bottom fares and then getting them to pay extra for things that are free on many other airlines, such as bringing a carry-on bag or ordering a soda.
In a highly unusual move, Spirit planned to cut its October-through-December schedule by nearly 20%, compared with the same period last year, which analysts said should help prop up fares. But that would help rivals more than it would boost Spirit.
Analysts from Deutsche Bank and Raymond James say that Frontier, JetBlue and Southwest would benefit the most because of their overlap with Spirit on many routes.
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Spirit has also been plagued by required repairs to Pratt & Whitney engines, which is forcing the airline to ground dozens of its Airbus jets. Spirit has cited the recall as it furloughed pilots.
The aircraft fleet is relatively young, which has made Spirit an attractive takeover target.
Frontier tried to merge with Spirit in 2022 but was outbid by JetBlue. However, the Justice Department sued to block the $3.8 billion deal, saying it would drive up prices for Spirit customers who depend on low fares, and a federal judge agreed in January. JetBlue and Spirit dropped their merger two months later.
U.S. airline bankruptcies were common in the 1990s and 2000s, as airlines struggled with fierce competition, high labor costs and sudden spikes in the price of jet fuel. PanAm, TWA, Northwest, Continental, United and Delta were swept up. Some liquidated, while others used favorable laws to renegotiate debts such as aircraft leases and keep flying.
The last bankruptcy by a major U.S. carrier ended when American Airlines emerged from Chapter 11 protection and simultaneously merged with US Airways in December 2013.
The Associated Press contributed reporting.
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