Spirit Airlines, known for its no-frills approach to air travel, filed for Chapter 11 bankruptcy protection on Monday, signaling a difficult turn in the airline’s long battle for profitability.
The low-cost carrier, which has not posted a profit since 2019, cited an inability to renegotiate its debt as the primary reason behind the filing, a culmination of years of financial setbacks and mounting pressures within the competitive airline industry.
Based in Miramar, Florida, Spirit has faced a series of challenges, from a failed merger attempt with JetBlue to rising competition and mechanical issues with its fleet. In its filing in US Bankruptcy Court for the Southern District of New York, the airline announced that it had reached an agreement with bondholders to restructure its debt and secure additional funding to continue operations through the bankruptcy process. Spirit expects to exit Chapter 11 by the first quarter of 2025.
Despite the financial turmoil, Spirit assured customers that operations would proceed as usual.
“You can continue to book and fly now and in the future,” the airline stated in an open letter to its passengers.
This includes the continued use of all tickets, credits, and loyalty points.
The decision to seek bankruptcy protection comes after Spirit’s failed merger attempt with JetBlue earlier this year. A federal judge blocked the $3.8 billion deal, citing concerns that combining the two low-cost carriers would stifle competition and drive up prices for budget-conscious travelers. While Spirit’s leadership was optimistic about the merger’s potential, the inability to merge with JetBlue left the airline scrambling to regain its footing.
Spirit’s business model, which focuses on offering low fares but charging for add-ons such as baggage and seat selection, helped the airline carve out a significant presence in the US airline industry. Spirit became a disruptive force in the market, pressuring rivals to lower their fares and forcing other airlines to introduce similar budget options. However, in recent years, the airline’s costs have increased, while its fares have been under pressure from larger carriers offering “basic economy” tickets.
For the first six months of 2024, Spirit’s passengers flew 2% more than the previous year, but the airline’s revenue per mile dropped by 10%, and the cost per mile fell nearly 20%. This has contributed to Spirit’s financial difficulties, as rising labor costs and competition from both traditional and low-cost carriers have eaten into its profits.
Another significant issue has been engine problems with Spirit’s fleet of Airbus A320 planes. A defect in the Pratt & Whitney engines has forced Spirit to ground about 10% of its aircraft, exacerbating the airline’s difficulties. Spirit has already delayed the delivery of new planes and furloughed pilots to cut costs. The airline is also negotiating compensation from Pratt & Whitney, expecting between $150 million to $200 million to help mitigate the losses.
In an effort to diversify its revenue streams, Spirit introduced premium services earlier this year, offering bundles that include perks such as extra legroom, priority boarding, and waived baggage fees. Despite these attempts to upgrade its offerings, Spirit has continued to struggle against a backdrop of oversupply in popular travel destinations and rising competition from larger airlines that can afford to offer both low-cost and premium services.
The airline’s financial woes have been compounded by a string of failed merger talks. In 2022, Frontier Airlines made an unsuccessful bid to acquire Spirit, but was outbid by JetBlue, only for the merger to ultimately fail when regulators raised antitrust concerns. The Justice Department’s successful lawsuit against the JetBlue-Spirit merger further complicated Spirit’s future, leaving the airline to confront its financial challenges alone.
With the bankruptcy filing, Spirit joins a long list of US airlines that have used Chapter 11 protection to restructure and emerge stronger. American Airlines, Delta Air Lines, and United Airlines all filed for bankruptcy in the past, only to return to profitability in the years that followed. However, Spirit faces a unique set of challenges as a budget carrier that does not offer the premium services that have helped larger airlines recover in the post-pandemic era.
Analysts have expressed cautious optimism that Spirit’s bankruptcy filing could help it emerge more financially stable. By restructuring its debts, the airline hopes to position itself for future growth, though it remains to be seen whether it can capitalize on its low-cost model in an increasingly competitive and unpredictable market.
While Spirit Airlines continues to face significant obstacles, including rising costs, mechanical issues, and intense competition, it will look to use its Chapter 11 bankruptcy process to reset its operations. The airline’s future may depend on how it can adapt to the changing landscape of air travel, with a focus on profitability and sustainability as it works through its financial restructuring.
The New York Times, New York Post, and ABC News contributed to this report.
