Passengers check in at the Spirit Airlines counter at Fort Lauderdale-Hollywood International Airport on February 7, 2022 in Fort Lauderdale, Florida.
Joe Reddell | Getty Images
spirit airlinesAn icon of budget air travel that reshaped the industry, the company has filed for bankruptcy protection after years of losses, failed mergers and improving consumer tastes.
The airline said earlier on Monday it had reached a prearranged agreement with its bondholders that included $300 million in debtor-in-possession financing. Suppliers, aircraft lessors, will not be harmed, it said.
The airline said it expected to continue normal operations and said customers could continue to book. The company said it expects to exit bankruptcy protection in the first quarter of next year.
“The bottom line is that you can continue to book and fly now and in the future,” Spirit CEO Ted Christie said in a letter to customers on Monday. He said customers can use tickets, points and loyalty points “as normal.”
The Dania Beach, Florida-based airline has been grappling with engine recalls that grounded dozens of planes, post-pandemic cost spikes and failed acquisition plans. JetBlue AirwaysEarlier this year, a federal judge blocked the plan on antitrust grounds. Its shares have fallen more than 90% so far this year.
Spirit Airlines is the first major U.S. airline to file for Chapter 11 bankruptcy since American Airlines 13 years ago.
The airline has repeatedly pushed back a deadline to renegotiate $1.1 billion in debt due next year with its credit card processor or risk losing the ability to process those transactions.
Last week, Spirit said it had to postpone its quarterly filing and said it was discussing a deal with most of its creditors that would not affect customers, vendors, suppliers and others but would “result in the company canceling existing equity stakes.” “
Spirit said in the filing that it expects third-quarter profit margins to fall 12 percentage points from a year ago and sales to be $61 million lower than last year, as costs soar and fares fall.
The airline has not been profitable since 2019, losing more than $335 million in the first half of this year.
To make up the difference, the company sold dozens of planes to replenish cash, a benefit for the company as aircraft are in short supply this year. Most recently, the company sold 23 Airbus aircraft to GA Telesis, generating $519 million in revenue. Spirit said it expects to have about $1 billion in liquidity by the end of the year.
The company also plans to furlough an additional 330 pilots in January, on top of cutting about 200 pilots in September. But analysts expect the airline will have to further downsize after the bankruptcy to control costs.
spiritual path
Spirit’s business model of offering the lowest fares and fees on everything from seat assignments to carry-on bags has proven successful among customers looking for bargains, allowing it to expand for more than a decade.
Its simple service has become a favorite punch line for stand-up comedy. greeting card One of the airline’s yellow planes even says, “I’d fly Spirit Airlines for you.”
The low fare and surcharge model has given rise to major airlines such as delta, American and unitedintroduced basic economy class fares.
However, Spirit struggled in the wake of the pandemic, with costs rising across the industry and the lifting of travel restrictions triggering a surge in international travel bookings outside the Spirit network. Fares fell in an oversupplied U.S. market.
This summer, Spirit Airlines began offering bundled fares with seat assignments and other benefits, as well as a “first class” cabin that includes larger seats at the front of the plane, as many travelers choose to pay more for roomier seats on board .
In January, a federal judge blocked JetBlue Airways’ planned $3.8 billion acquisition of Spirit. Spirit Airlines has previously struck merger deals with other low-cost airlines border Before JetBlue launched the acquisition in April 2022.
Judge William Young, who was appointed by former President Ronald Reagan, said the JetBlue deal would drive up fares and reduce competition. Airlines argue this will help them compete better, especially in the United States, where four airlines control about three-quarters of the market.
“Spirit Air is a small airline. But there are people who love it,” Young wrote in his ruling. “For loyal Spirit customers, this is for you.”
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