Spirit Airlines files for bankruptcy

MANHATTAN (CN) — Spirit Airlines filed for bankruptcy protection Monday as the company grapples with its inability to renegotiate crippling debts and a failed attempt to merge with other airlines.

The airline, known for selling cheap tickets on flights that lack typical amenities, filed for Chapter 11 bankruptcy protection in New York. It also announced an agreement with bondholders to restructure its debts and raise $300 million to help it operate during the bankruptcy process.

“I am pleased we have reached an agreement with a supermajority of both our loyalty and convertible bondholders on a comprehensive recapitalization of the company,” Ted Christie, Spirit’s president and chief executive officer, said in a statement.

The company expects to be finished with the bankruptcy process in the first quarter of next year.

Christie added that the process, as well as its plan to restructure its debts, will position Spirit to “materially strengthen our balance sheet and position Spirit for the future.”

In an open letter to customers, Spirit told fliers they could still use “all tickets, credits and loyalty points as normal.” The company added that its loyalty program and credit card terms remain intact.

Spirit’s financial struggles have mounted since a federal judge blocked a merger between the discount airline and JetBlue Airways, finding that the deal violated antitrust laws. And it failed to bounce back after the pandemic, unlike larger airlines that were able to regain profitability when demand for air travel increased.

But Spirit has also seen financial losses due to defective Pratt & Whitney engines that caused the airline to ground some of its planes. The airline has said it expects to receive up to $200 million from Pratt & Whitney in exchange for the engine defects.

To balance out its losses, Spirit has delayed delivery of new planes, furloughed hundreds of its pilots and announced the sale of 23 of its Airbus jets. The company said it plans to cut additional staff in January.

In its bankruptcy filing, Spirit said it had between 25,000 and 50,000 creditors and roughly $9 billion in debts at the end of September. The airline added that it would delist its shares from the New York Stock Exchange.

Spirit joins the mass of other airlines that have also filed for bankruptcy, usually emerging on stronger financial footing when they do so.

According to data from the trade group Airlines for America, airlines have filed for bankruptcy more than 180 times in the past few decades. Three of America’s largest airlines — American Airlines, Delta Air Lines and United Airlines — filed bankruptcy cases after the Sept. 11, 2001, terrorist attacks.

Spirit is known for its low-fare model, with additional options to pay extra fees to add bags or purchase snacks that other airlines often include in their price. It has remained a popular option for travelers looking for a no-frills cheap ticket, and other airlines have followed suit by offering similar fare options without additional amenities.

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