Spirit Airlines files for bankruptcy, seeks restructuring to stay competitive

Spirit Airlines, which pioneered ultralow-cost air travel, has filed for Chapter 11 bankruptcy, reports the Wall Street Journal, becoming the first major US passenger airline to do so since American Airlines in 2011. The expected bankruptcy is the result of mounting debt, rising labor costs, and intense competition from legacy carriers adopting low-price strategies (just think basic economy). The airline had attempted to merge with JetBlue, which the Biden administration blocked, and was hit by GTF engine issues. Spirit has assured passengers that all bookings, credits, and loyalty points remain valid, emphasizing uninterrupted operations as it navigates restructuring.

A proposed plan backed by bondholders includes a $350 million equity investment and the conversion of $800 million in debt into equity, offering a path to reduce Spirit’s liabilities by nearly $800 million. Spirit's restructuring plan aims to streamline operations and restore financial stability by the first quarter of 2025. The ULCC hopes to leverage its restructuring to explore strategic partnerships, optimize its route network, and invest in operational efficiencies.