America's Biggest Budget Airlines Goes Bankrupt As Debt Payments Cross $1 Billion

Florida: Spirit Airlines said Monday that it has filed for bankruptcy protection and will attempt to reboot as it struggles to recover from pandemic-caused swoon in travel and a failed attempt to sell airline to JetBlue.

Spirit, biggest U.S. budget airline, has lost more than $2.5 billion since start of 2020 and faces looming debt payments totaling more than $1 billion over next year.

Spirit said it expects to operate as normal as it works its way through a prearranged Chapter 11 bankruptcy process and that customers can continue to book and fly without interruption. All tickets, credits and loyalty points remain valid, airline said, as are affiliated credit cards and or membership perks.

Shares of Spirit Airlines Inc., based in Miramar, Florida, dropped 25% on Friday, after Wall Street Journal reported that airline was discussing terms of a possible bankruptcy filing with its bondholders. It was just latest in a series of blows that have sent stock crashing down by 97% since late 2018 — when Spirit was still making money.

Shares rose nearly 4% before opening bell Monday.

CEO Ted Christie confirmed in August that Spirit was talking to visers of its bondholders about upcoming debt maturities. He called discussions a priority, and said airline was trying to get best deal it could as quickly as possible.

“ chatter in market about Spirit is notable, but we are not distracted,” he told investors during an earnings call. “We are focused on refinancing our debt, improving our overall liquidity position, deploying our new reimagined product into market, and growing our loyalty programs.”

'People are still flying on Spirit Airlines. y’re just not paying as much.

In first six months of this year, Spirit passengers flew 2% more than y did in same period last year. However, y are paying 10% less per mile, and revenue per mile from fares is down nearly 20%, contributing to Spirit’s red ink.

It’s not a new trend. Spirit failed to return to profitability when coronavirus pandemic eased and travel rebounded. re are several reasons behind slump.

Spirit’s costs, especially for labor, have risen. biggest U.S. airlines have snagged some of Spirit’s budget-conscious customers by offering ir own brand of bare-bones tickets. And fares for U.S. leisure travel — Spirit’s core business — have sagged because of a glut of new flights.

Association of Flight Attendants told union members early Monday that it does not expect any furloughs, or changes to pay or working conditions. union also said that it has retained bankruptcy counsel.

premium end of air-travel market has surged while Spirit’s tritional no-frills end has stagnated. So this summer, Spirit decided to sell bundled fares that include a bigger seat, priority boarding, free bags, internet service and snacks and drinks. That is a huge change from Spirit’s longtime strategy of luring customers with rock-bottom fares and forcing m to pay extra for things such as bringing a carry-on bag or ordering a soda.

In a highly unusual move, Spirit plans to cut its October-through-December schedule by nearly 20%, compared with 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 most because of ir overlap with Spirit on many routes.

Spirit has also been plagued by required repairs to Pratt & Whitney engines, which is forcing airline to ground dozens of its Airbus jets. Spirit has cited recall as it furloughed pilots.

aircraft fleet is relatively young, which has me Spirit an attractive takeover target.

Frontier Airlines tried to merge with Spirit in 2022 but was outbid by JetBlue. However, Justice Department sued to block $3.8 billion deal, saying it would drive up prices for Spirit customers who depend on low fares, and a federal judge agreed in January. JetBlue and Spirit dropped ir merger two months later.

U.S. airline bankruptcies were common in 1990s and 2000s, as airlines struggled with fierce competition, high labor costs and sudden spikes in price of jet fuel. PanAm, TWA, Northwest, Continental, United and Delta were swept up. Some liquidated, while ors used favorable laws to renegotiate debts such as aircraft leases and keep flying.

last bankruptcy by a major U.S. carrier ended when American Airlines emerged from Chapter 11 protection and simultaneously merged with US Airways in December 2013.