US no-frills pioneer Spirit Airlines files for bankruptcy protection

The Florida-based hose is the archetypal large US hose to record for Chapter 11 bankruptcy extortion since 2011.

Spirit Airlines, the no-frills US question pioneer, has filed for bankruptcy extortion aft struggling with years of losses, failed merger attempts and dense indebtedness levels, the institution said.

The Florida-based hose said connected Monday that it had pre-arranged a woody with its bondholders to restructure its debts and rise wealth to assistance it run during the bankruptcy process, which it expects to exit successful the archetypal 4th of 2025.

It is the archetypal large United States-based hose to record for Chapter 11 bankruptcy extortion successful much than a decade, aft a projected $3.8bn merger with JetBlue Airways collapsed successful January.

Intense contention among US carriers for price-sensitive leisure travellers arsenic good arsenic an oversupply of hose seats successful the home marketplace deed Spirit’s pricing power. Its mean fare per rider was down 19 percent connected a year-on-year ground successful the archetypal fractional of this twelvemonth from a twelvemonth earlier.

The bearer said it expected to proceed operating its concern arsenic mean done the proceedings, and customers could publication and alert without interruption.

The Chapter 11 process volition not interaction wages oregon benefits of its employees, it said. Its vendors and craft lessors volition besides proceed to beryllium paid and volition not beryllium impaired, it added.

The institution said it expected to beryllium delisted from the New York Stock Exchange successful the adjacent term, and that its shares would beryllium cancelled and person nary worth arsenic portion of the restructuring.

Spirit’s shares, which person plunged much than 90 percent this year, were halted connected Monday. Shares of rival low-cost carriers Frontier Airlines and JetBlue fell 14 percent and 6 percent, respectively.

Shrinking operations

Spirit, known for its agleam yellowish livery, is the archetypal large US hose to record for Chapter 11 since 2011.

Low-cost bearer Spirit Airlines  has not posted a full-year nett since 2019 [File: Regis Duvignau/Reuters]

It has been among the airlines astir heavy affected by issues with RTX-owned Pratt & Whitney Geared Turbofan engines, which person forced it to crushed aggregate craft and driven up costs.

Spirit has not posted a full-year nett since 2019. It mislaid astir $360m successful the archetypal fractional of this twelvemonth contempt beardown question demand.

Analysts accidental a merger with JetBlue would person thrown a lifeline to the company. However, a Boston justice blocked the woody connected the grounds that it would trim competition, raising doubts astir the company’s quality to negociate looming indebtedness maturities.

Spirit has been shrinking its operations arsenic portion of its efforts to chopped costs and enactment up its finances. It has furloughed hundreds of pilots and delayed craft deliveries. It is besides selling its planes to boost liquidity.

‘Comprehensive’ restructuring

In its Chapter 11 extortion filing successful New York, Spirit said a “comprehensive equilibrium expanse restructuring” was expected to trim full debt, supply accrued fiscal flexibility, presumption it for semipermanent success, and accelerate investments.

As portion of the restructuring agreement, the institution has received commitments for a $350m equity concern from existing bondholders. It plans to trim its indebtedness load by $795m via a debt/equity swap transaction.

Existing bondholders volition besides supply $300m successful debtor-in-possession financing, which, unneurotic with disposable cash, is expected to enactment the hose done the Chapter 11 process.

Spirit’s formation attendants’ national said the bankruptcy filing does not alteration pay, benefits oregon moving conditions for its members. It told formation attendants to proceed to enactment arsenic planned.

The institution started retired arsenic a long-haul trucking institution successful 1964 earlier shifting to aviation astir 1983. It offered leisure packages to fashionable destinations nether the sanction Charter One Airlines and rebranded to Spirit successful 1992.

The discount bearer became fashionable with budget-conscious customers consenting to forgo amenities similar checked bags and spot assignments.

Ultra-low-cost carriers, which excelled astatine keeping their expenses debased and offering affordable, no-frills travel, person struggled since the COVID-19 pandemic arsenic immoderate travellers similar to wage other for much comfy journeys.

Spirit’s troubles, on with those of immoderate rival fund carriers, person spurred speech among immoderate Wall Street analysts of a flawed concern model.