Spirit Airlines had been racing to renegotiate its debt with bondholders.
Credit...Brandon Bell/Getty Images

Spirit Airlines Files for Bankruptcy

The low-fare carrier has struggled to find its footing after its planned merger with JetBlue was blocked by a federal judge.

by · NY Times

Spirit Airlines, whose approach to selling cheap tickets without amenities earned it fans and detractors, filed for bankruptcy protection on Monday after a string of setbacks, most recently a failure to renegotiate its looming debt.

The airline, which last reported an annual profit in 2019, has had trouble finding its footing after a federal judge blocked a planned merger with JetBlue Airways in January. Spirit has also struggled to capitalize on the recovery from the pandemic because of intense competition, engine problems and other factors.

The company filed for Chapter 11 bankruptcy protection in New York. It also announced an agreement with bondholders to restructure its debts and raise money to help it operate during the bankruptcy process, which it expected to exit in the first quarter of next year.

Spirit, which has lost more than $2.2 billion since the start of 2020, published an open letter to customers saying that fliers could “use all tickets, credits and loyalty points as normal.”

Ted Christie, the airline’s chief executive, said in a statement that the arrangements announced on Monday represented a “a strong vote of confidence in Spirit and our long-term plan.”

The airline said in a court filing that it had 25,000 to 50,000 creditors, and total debt of about $9 billion at end of September. It said its shares would be delisted from the New York Stock Exchange. Spirit’s share price had fallen more than 90 percent since the start of the year.

The airline began operations as a trucking company operating under a different name in 1964. It later became a tour operator and started offering flights in 1990. Two years later, it became Spirit Airlines.

But the modern incarnation of the company traces its roots to 2006, when Indigo Partners, a private equity fund, acquired a majority stake in Spirit. Under Indigo and the leadership of Ben Baldanza — who spent a decade as Spirit’s chief executive and died this month — the airline focused on lowering costs and selling cheap, bare-bones tickets.

That business model made the airline the butt of late-night jokes, but also helped to reshape the industry. Travelers flocked to Spirit for its low fares, often overlooking concerns about the quality of its service. The airline earned consistent profits and other companies sought to copy its approach. Today, most U.S. airlines offer some version of a no-frills ticket.

Spirit also became a powerful force in the industry, pressuring others to lower fares. That phenomenon became a central part of the Justice Department’s successful lawsuit to prevent the JetBlue-Spirit merger, on the grounds that losing Spirit would harm consumers.

The bankruptcy filing comes after Spirit had spent months trying to renegotiate its debts. Companies, including many airlines, often emerge from Chapter 11 bankruptcy cases on stronger financial footing.

Airlines have filed for bankruptcy more than 180 times in recent decades, according to data from Airlines for America, a trade group. Three of the industry’s largest companies — American Airlines, Delta Air Lines and United Airlines — filed bankruptcy cases after the Sept. 11 terrorist attacks. Spirit’s is the first from a major airline in more than a decade.

The nation’s largest airlines have profited from the pandemic recovery, in part by taking advantage of demand for premium and international travel. But Spirit and other budget airlines have had a more challenging time managing rising costs, especially for labor, and increased competition.

This summer was the busiest ever for air travel, according to Transportation Security Administration data. But low-fare carriers struggled because many of the popular destinations they serve were flooded with seats. The low-cost airlines have also faced rising competition from larger carriers selling “basic economy” tickets.

Spirit flew slightly more passengers in the first half of this year compared with the same period in 2023. But those passengers paid nearly 20 percent less in fares per flight.

The company’s largest union, a chapter of the Association of Flight Attendants, told its members to continue to work as planned, saying that it would fight to protect their interests in the bankruptcy process.

Some of Spirit’s problems are out of its control. The airline flies about 200 Airbus A320 planes, but a defect with the Pratt & Whitney engines that power some of those aircraft means about one in 10 will not be flying this year. Spirit said this year that it expected to start 2025 with 35 planes on the ground, rising to about 67.

The airline has said it expects to receive $150 million to $200 million in compensation from Pratt & Whitney. To cut costs, Spirit had delayed delivery of new planes and furloughed pilots. It sold nearly two dozens planes last month and may sell more, though most of its planes are leased, according to Cirium.

Over the summer, Spirit tried to revive its fortunes by offering premium services. In July, the airline announced that it would start selling four fare bundles, which include different perks. The top offering includes a seat with extra legroom, priority boarding, refreshments and waived bag fees. Another includes some of those perks and a guaranteed empty middle seat.

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