Spirit Airlines prepares for bankruptcy filing amid ongoing financial woes 

It has been revealed that US low-cost carrier Spirit Airlines has entered initial discussions with its bondholders regarding the terms of a potential future bankruptcy filing. The Florida-based airline has been forced to restructure its operations, aircraft fleet, and network amid ongoing financial issues. These have been exacerbated by the US Department of Transportation’s decision to reject its proposed merger with New York-based JetBlue earlier in 2024. 

Spirit is reportedly considering a Chapter 11 bankruptcy protection filing as it seeks additional time and protection from its creditors while it puts in place various cost-cutting measures. However, any such filing would rely on the move having sufficient support, and a formal agreement having been reached with bondholders and creditors to support it. 

Additionally, the carrier is looking into the restructuring of its balance sheet through an out-of-court transaction, according to a report published by the Wall Street Journal on Thursday, October 3, 2024, although no specific details regarding this have been made public.  

Spirit is already facing mounting pressure from banks and creditors over a debt said to be worth in the region of $3.3 billion. This amount includes over $1.1 billion in secured bonds which will mature within twelve months. The airline is legally obliged to refinance or extend these bonds by October 21, 2024, a factor that is forcing the airline’s hand in terms of putting contingency plans in place.     

In August 2024, the company’s CEO Ted Christie announced that the company had begun “active discussions with bondholders’ advisers,” specifically to address the imminent maturity of these bonds. 

Spirit AirlinesSpirit’s financial pressures are increasing due to the budget carrier’s inability to operate profitably, a situation that was worsening even before the COVID-19 pandemic. The company has been introducing various cost-saving measures to address the situation, although these appear to have had little impact on the airline’s overall financial state.  

The airline has also been reducing the scale of its operations in recent months, due in part to the carrier’s fleet of Airbus A320neo family of aircraft suffering from ongoing maintenance issues surrounding its Pratt & Whitney geared turbofan engines. This has led to a downsizing of the number of flights being operated by 20% in the last quarter of 2024 and sizeable numbers of its pilot workforce being furloughed.     

The airline had held high hopes for its proposed merger with JetBlue. The strategy was to create a more dominant organization that could better compete in terms of scale with the US legacy carriers Delta, United, and American. However, the proposed deal was called off in March 2024, following the Department of Transportation ruling that it could not go ahead as various conditions had not been met by the parties involved. 

Spirit Airlines shares slumped by 40% on Friday, October 4, 2024, following the publication of the Wall Street Journal article stating that the carrier had entered discussions with its bondholders over a possible Chapter 11 bankruptcy filing. The share value of the company has dropped by more than 85% in 2024 so far, with this downward spiral showing no signs of abating.  

Additionally, the company has already notified the markets that it was expecting a steeper loss in the third quarter than analysts had forecast, due to what it describes as an “intense competitive battle for price-sensitive leisure travelers and an oversupply of airline seats in the domestic market”. 

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