Spirit Airlines, the largest U.S. budget carrier, announced its bankruptcy filing today after prolonged losses, failed merger attempts, and mounting debt.
Despite strong travel demand, the airline, known for its bright yellow livery, faced rising operating costs, straining its budget-friendly model.
“Guests can continue to book and fly without interruption and can use all tickets, credits and loyalty points as normal,” it said in a statement.
Spirit’s shares have plummeted by more than 90 percent this year and were halted for trading on Monday.
The company has filed for Chapter 11 bankruptcy protection, reporting estimated assets and liabilities each between $1 billion and $10 billion. Spirit has secured a $350 million equity investment and $300 million in debtor-in-possession financing from existing bondholders, aiming to reduce debt and enhance financial flexibility during the restructuring process.
In recent years, Spirit pursued mergers with Frontier Airlines and JetBlue Airways, but while JetBlue outbid Frontier, its acquisition was blocked by a federal judge over antitrust concerns.
Last week, Fitch Ratings downgraded Spirit Airlines’ credit rating to “CC” from “CCC,” indicating a probable near-term default.
Additionally, Spirit expects to be delisted from the New York Stock Exchange soon, with its shares continuing over-the-counter trade during the bankruptcy process.
“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,” Christie said in a statement.
“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.”
The company began as a long-haul trucking business in 1964, transitioned to aviation in 1983 as Charter One Airlines offering leisure packages, and rebranded as Spirit Airlines in 1992.
By introducing ultra-low base fares in the United States, Spirit appealed to budget travelers who prioritized low costs over amenities such as checked bags and seat assignments.
Spirit Airlines has faced significant challenges recently, including increased competition from major carriers offering low-price tickets. An oversupply of flights on leisure routes has suppressed fares, impacting revenue. Simultaneously, the airline has grappled with rising labor costs and engine issues that have grounded numerous aircraft, further straining operations.
In the first half of this year, Spirit Airlines experienced a 2 percent increase in passenger numbers from the same period last year. However, passengers paid 10 percent less per mile, leading to a nearly 20 percent decline in fare revenue per mile. This trend has exacerbated Spirit’s financial woes.
Budget airlines have struggled financially in recent years, leading to several bankruptcies.
Icelandic ultra-low-cost carrier WOW Air, founded in 2011, ceased operations in March 2019 after failed acquisition talks, stranding thousands of passengers.
British carrier Thomas Cook Airlines, a part of the Thomas Cook Group, shut down in September 2019 due to its parent company’s liquidation.
Flybe, once Europe’s largest independent regional airline, entered administration in March 2020 amid rising costs and competitive pressures.
And Danish low-cost carrier Primera Air shut down in October 2018, citing delayed aircraft deliveries and increased operational expenses.