Spirit Airlines files for bankruptcy protection

Spirit Airlines filed for bankruptcy protection, it said on Monday, after the pioneer of no-frills travel in the United States struggled with a long run of quarterly losses, failed merger attempts and looming debt maturities, reports Reuters.
The Florida-based airline said it had pre-arranged a deal with its bondholders to restructure its debts and raise money to help it operate during the bankruptcy process, which it expects to exit in the first quarter of 2025.
The carrier said it expected to continue operating its business as normal through the proceedings and customers could book and fly without interruption.
The Chapter 11 process will not impact wages or benefits of its employees, it said. Its vendors and aircraft lessors will also continue to be paid and will not be impaired, it added.
The company said it expected to be delisted from the New York Stock Exchange in the near term.
PROFIT STRUGGLE
Spirit, known for its bright yellow livery, is the first major U.S. airline to file for Chapter 11 in the past decade. It has been facing an uncertain future after the collapse of its $3.8 billion planned merger with JetBlue Airways in January.
Meanwhile, intense competition among US carriers for price-sensitive leisure travelers as well as an oversupply of airline seats in the domestic market hit its pricing power. Its average fare per passenger was down 19% year-on-year in the first half of this year from a year earlier.
It is also among the airlines most heavily affected by issues with RTX's Pratt & Whitney Geared Turbofan engines, which have forced it to ground multiple aircraft and driven up costs.
Spirit has not posted a full-year profit since 2019. It lost about $360 million in the first half of this year despite strong travel demand.
Analysts say a merger with JetBlue would have thrown a lifeline to the company. However, a Boston judge blocked the deal on the grounds it would reduce competition, raising doubts about the company's ability to manage looming debt maturities.
Spirit has been shrinking its operations as part of its efforts to cut costs and shore up its finances.
It has furloughed hundreds of pilots and delayed aircraft deliveries. It is also selling its planes to boost liquidity.
It filed for Chapter 11 protection in New York. The airline said a "comprehensive balance sheet restructuring" was expected to reduce total debt, provide increased financial flexibility, position it for long-term success, and accelerate investments.
As part of the prearranged Chapter 11 bankruptcy protection, the company has received commitments for a $350 million equity investment from existing bondholders.
Existing bondholders will also provide $300 million in debtor-in-possession (DIP) financing, which, together with available cash, is expected to support the airline through the Chapter 11 process.
HUMBLE BEGINNINGS
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 some travelers prefer to pay extra for a more comfortable journey as they pursue experiences.
Spirit's troubles, along with those at some of rival budget carriers, have spurred talk of a flawed business model among some Wall Street analysts.