Spirit Airlines files for bankruptcy amid losses, failed mergers

Budget air travel pioneer Spirit Airlines filed for Chapter 11 bankruptcy protection on Monday, marking the first major US airline to do so since American Airlines 13 years ago.

The move comes amid mounting losses and failed merger attempts with JetBlue and Frontier Airlines. The carrier lost over $335 million in the first half of the year and hasn’t made a profit since 2019.

While Spirit’s fee-driven model worked for years and inspired similar low-cost fare offerings across major carriers, it has struggled post-pandemic due to cost surges and a shift in consumer travel patterns. Its problems increased as more airlines started offering the lowest price economy seats on carriers.

But if you’re worried about your booked flight, there is no need to panic. Chapter 11 allows a business to reorganize its finances and debts while remaining in operation.

Spirit has a $3.6 billion debt load. Since 2020, the airline has lost over $2.2 billion, nearly wiping out its entire profits since 2006.

What’s next?
Spirit has secured a $300 million loan from bondholders for bankruptcy proceedings. It plans to emerge from bankruptcy in the first quarter of next year.

Bondholders have committed to swapping bonds for equity in a reorganized Spirit, which would reduce the company’s debt by $795 million.

The airline has already shed Airbus jets and plans additional staff reductions in early 2024.

As Spirit plans to emerge more sustainable, industry watchers speculate a potential revival of merger talks under the Trump administration. 

However, possible outcomes include further downsizing, asset sales or liquidation.

Spirit’s future remains uncertain, but customer bookings, loyalty points, and vendor relations remain unaffected.