Spirit Airlines Files for Bankruptcy for Second Time in a Year
The budget carrier seeks to slash costs and restructure its operations amid mounting losses and a challenging market.
Spirit Airlines filed for Chapter 11 bankruptcy protection on Friday for the second time in a year, a stark admission that its previous restructuring efforts had failed to put the budget carrier on a sustainable financial path. The airline, known for its bright yellow planes and no-frills service, said its flights and operations will continue as normal while it seeks to implement a comprehensive financial and operational overhaul.
The filing comes just months after Spirit emerged from a previous bankruptcy in March, which was aimed at reducing its debt load. However, the airline has continued to grapple with high operational costs, a downturn in U.S. domestic travel demand, and a series of company-specific challenges. “Since emerging from our previous restructuring... it has become clear that there is much more work to be done,” said Spirit CEO Dave Davis in a news release.
Spirit’s woes have been compounded by a number of factors, including a recall of Pratt & Whitney engines that grounded many of its aircraft and the collapse of a proposed $3.8 billion merger with JetBlue Airways, which was blocked by a federal judge over antitrust concerns. The airline has also faced increased competition from larger carriers that have introduced their own basic economy fares, mimicking Spirit's low-cost model while offering more perks and extensive loyalty programs.
The carrier’s financial performance has been dire. After forecasting a net profit of $252 million for this year, Spirit instead lost nearly $257 million between March 13 and the end of June. The company’s shares have plummeted 72% over the past month, and Spirit has warned it may not be able to survive a year without a significant cash infusion.
Under the latest bankruptcy plan, Spirit intends to reduce its network, shrink its fleet, and cut “hundreds of millions of dollars” in annual costs. The company will focus its flying on key markets and reduce its presence in others. The airline's stock is expected to be delisted from the NYSE American Exchange and trade in the over-the-counter market, with the shares anticipated to be canceled and have no value as part of the restructuring.
Spirit’s struggles reflect a broader shift in consumer preferences post-pandemic, with many travelers now favoring pricier, more comfortable seating and international destinations over the bare-bones domestic travel that was the airline's hallmark. Rival Frontier Airlines is already capitalizing on Spirit’s troubles, announcing 20 new routes that directly compete with the struggling carrier.