Spirit Airlines has filed for bankruptcy protection amid mounting losses and stiff competition from rival budget airlines. The American carrier has lost billions since the Covid-19 pandemic and will now work to restructure its debt while continuing to operate flights across the U.S.
Spirit has lost more than $2.5 billion since 2020 and has another $1 billion in debt payments looming large and due over the coming year, reports CNN. As such, the airline filed for bankruptcy protection with the hope of restructuring its credit and come back from the brink stronger than ever:
Airlines and other companies in the United States frequently file for bankruptcy and emerge stronger on the other side of the process. Most major US airlines, including the three largest — American Airlines, United and Delta — have filed for bankruptcy at some point in the past 25 years.
Spirit’s statement said that as a result of its bankruptcy and negotiations with existing creditors it will be able [to] emerge early next year with reduced debt and increased financial flexibility that will “position Spirit for long-term success and accelerate investments providing guests with enhanced travel experiences and greater value.” It added that the creditors had agreed to pump an additional $300 million into the airline to fund its operations through the bankruptcy process.
While the bankruptcy process continues, Spirit has taken steps to try and reassure passengers that it’s business as usual. The airline issued a statement assuring ticket holders that it “expects to operate as normal,” reports the Guardian. The messages were mixed, though, as it has also taken steps to slash its services over the coming months:
In a highly unusual move, Spirit plans to cut its October-through-December schedule by nearly 20%, compared with the same period last year, which analysts say should help prop up fares. But that will help rivals more than it will boost Spirit. Analysts from Deutsche Bank and Raymond James say that Frontier, JetBlue and Southwest would benefit the most because of their overlap with Spirit on many routes.
The cut in services for Spirit follows a tough few years for the budget carrier in the aftermath of the pandemic. While more premium airlines saw profits bounce back, Spirit struggled to recoup funds as operating costs spiraled. Services were also hit by a recall of engines used on some Airbus aircraft, which forced Spirit to ground planes.
Despite this, the carrier has seen passenger numbers rise, with the Guardian adding that traveler numbers for Spirit were up two percent this year.
Now, the airline will be hoping restructuring will be enough to turn those rising passenger numbers into rising profits. If not, CNN warns that the carrier may not come back from this and could, instead, be sold off to a rival.
This isn’t the first time a sale has been floated, with Spirit recently attempting to merge with Frontier Airlines and JetBlue on separate occasions. The second proposed sale with JetBlue was blocked by a federal judge on antitrust grounds.
It hasn’t been a good month for Spirit, as it was recently forced to divert one of its aircraft after gangs in Haiti shot at the plane as it was coming into land.