Spirit Airlines filed for Chapter 11 bankruptcy protection Monday as the largest U.S. budget carrier grapples with more than $2.5 billion in losses since 2020 and looming debt payments exceeding $1 billion, marking a dramatic fall for an airline that once dominated the low-cost travel market.
The airline, whose stock has plummeted 97% since late 2018, emphasized that customers can continue booking and flying without interruption during the prearranged bankruptcy process. The announcement follows a 25% stock drop Friday after reports of potential bankruptcy negotiations with bondholders.
“The chatter in the market about Spirit is notable, but we are not distracted,” CEO Ted Christie told investors during a recent earnings call. “We are focused on refinancing our debt, improving our overall liquidity position, deploying our new reimagined product into the market, and growing our loyalty programs.”
Despite maintaining passenger numbers — up 2% in the first half of 2023 — Spirit has struggled with declining revenue as fares dropped 10% per mile and fare revenue per mile fell nearly 20%. The airline faces challenges including rising labor costs, competition from major carriers’ budget offerings, leisure travel fare decreases due to route saturation, and required Pratt & Whitney engine repairs grounding numerous Airbus jets.
The bankruptcy follows Spirit’s failed $3.8 billion merger with JetBlue, blocked by federal judges in January over concerns about reduced competition. The airline plans an unusual 20% schedule reduction for the fourth quarter, which analysts say could benefit competitors like Frontier, JetBlue, and Southwest on overlapping routes.
Spirit’s troubles reflect a dramatic shift in the airline industry’s post-pandemic recovery, where premium travel has surged while the budget sector stagnates. The airline recently abandoned its traditional ultra-low-fare model, introducing bundled fares including amenities like bigger seats and free bags.
This filing marks the first major U.S. airline bankruptcy since American Airlines emerged from Chapter 11 protection in December 2013 through its merger with US Airways.
AP
