Spirit Airlines files for bankruptcy after collapse of JetBlue merger
Spirit Airlines has filed for bankruptcy protection amid a long run of quarterly losses and significant debt, it disclosed today.
The no-frills airline, whose last annual profit was in 2019, has struggled financially for years, but its woes deepened in January after the collapse of its $3.8billion planned merger with JetBlue Airways.
Spirit has struggled to recover since the Covid-19 pandemic nearly shut down the airline industry and was hard hit again when problems with RTX's Pratt & Whitney Geared Turbofan (GTF) engines grounded many of its aircraft.
The company has no filed for Chapter 11 bankruptcy protection in New York, but says it will continue to operate while it restructures its debt.
In a statement released Monday, Spirit advised that 'guests can continue to book and fly without interruption and can use all tickets, credits and loyalty points as normal'.
Spirit, recognized for its bright yellow livery, had been losing money despite strong travel demand, as it struggled with bloated costs.
The airline listed its estimated assets and liabilities in the range of $1billion to $10billion each, according to a court filing on Monday.
Spirit has entered into an agreement with its bondholders that is expected to reduce total debt and provide increased financial flexibility.
The airline, as part of the prearranged Chapter 11 bankruptcy protection, has received commitment for a $350million equity investment from existing bondholders.
Existing bondholders will also provide $300million in debtor-in-possession (DIP) financing, which, together with available cash, is expected to support the airline through the Chapter 11 process.
Spirit expects to be delisted from the New York Stock Exchange in the near term.
The company started out as a long-haul trucking company in 1964 before shifting to aviation around 1983. It offered leisure packages to popular destinations under the name Charter One Airlines and rebranded to Spirit in 1992.
The discount carrier became popular with budget-conscious customers willing to forgo amenities like checked bags and seat assignments.
Ultra-low-cost carriers, which excelled at keeping their expenses low and offering affordable, no-frills travel, have struggled since the pandemic as travelers prefer to pay extra for a more comfortable journey as they pursue experiences.
Spirit's troubles, along with those at some of its rival budget carriers, have spurred talks of a flawed business model among some Wall Street analysts.
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