Passengers check in at the Spirit Airlines counter at Fort Lauderdale-Hollywood International Airport on February 7, 2022 in Fort Lauderdale, Florida.
Joe Radle | Getty Images
spirit airlinesThe airline, a symbol of low-cost air travel that reshaped the industry, filed for bankruptcy protection after years of mounting losses, failed mergers and tougher consumer tastes.
The company announced early Monday that it had reached a pre-arranged agreement with bondholders that included a $300 million loan to debtors-in-possession to help it emerge from bankruptcy law in the first quarter of next year. did. Vendors and aircraft lessors will not be impaired.
The airline said it expects to continue operating as normal and customers can continue to book as the holiday season approaches.
“The most important thing you need to know is that you can continue to book and fly now and in the future,” Spirit CEO Ted Christie said in a letter to customers on Monday. It means it can be done.” He said customers can use their tickets, credits and loyalty points as usual.
Spirit is the first major U.S. airline to file for Chapter 11 since American Airlines 13 years ago.
The Dania Beach, Fla.-based airline had struggled with an engine recall that grounded dozens of jets, rising costs after the pandemic and the failure of a planned acquisition. jet blue airlineswhich was blocked by a federal judge earlier this year on antitrust grounds. The company’s stock price has fallen more than 90% since the beginning of the year.
The company has repeatedly pushed back deadlines with credit card processors to renegotiate $1.1 billion in debt due next year or risk losing the ability to process those transactions.
The company announced Monday that it has reached an agreement with bondholders for $350 million in equity and “completed a deleveraging transaction to convert $795 million in financing notes into equity.”
Spirit has filed for protection in the U.S. Bankruptcy Court for the Southern District of New York. The filing will cause Spirit to be delisted from the New York Stock Exchange, the company said.
Spirit last week said it would have to postpone filing its quarterly financial results and is in talks with most of its creditors to reach an agreement that would wipe out their existing stake in the company, which would not affect customers, vendors or suppliers. He said there is.
Spirit said in a filing that it expects third-quarter profit margins to be 12 percentage points lower than a year ago and revenue to be $61 million lower than a year ago, despite soaring costs and falling freight rates. said.
The company hasn’t made a profit since 2019, with losses of more than $335 million in the first half.
In an effort to make up the difference, the company has sold dozens of jets to shore up cash, which has worked to its advantage this year due to a shortage of planes. Most recently, it sold 23 Airbus aircraft to GA Telesis, generating $519 million. Spirit said it expects to end the year with approximately $1 billion in liquidity.
The company furloughed about 200 pilots in September as it cut routes, and plans to furlough another 330 pilots in January. But analysts predict that if the airline goes bankrupt, it will have to further scale back operations to keep costs down.
spiritual path
Spirit’s business model, which offers the lowest fares and charges for everything from seat assignments to carry-on bags, has been successful with bargain-seeking customers and has allowed it to expand for more than a decade.
That bare-bones service became a popular punchline for stand-up comics. A greeting card featuring one of the airline’s yellow planes even says, “I’m flying Spirit Airlines for you.”
The low fares and surcharge model has led to similar offerings from major airlines, including: delta, american and unitedrolled out basic economy fares.
But Spirit struggled after the pandemic, as costs rose across the industry and bookings for international travel outside of Spirit’s network surged as travel restrictions were lifted. Freight rates fell in the oversupplied U.S. market.
This summer, Spirit began offering bundled fares that include seat selection and other perks, as well as seat reservations at the front of the plane, as many travelers choose to pay more for larger seats onboard. It also began offering a type of “first class” that included larger seats.
In January, a federal judge blocked JetBlue’s plan to buy Spirit for $3.8 billion. Spirit previously had a deal to merge with the same low-cost carrier. frontier Spirit shareholders supported JetBlue’s all-cash offer before JetBlue rushed to make a bid in April 2022.
Judge William Young, appointed by former President Ronald Reagan, said the partnership with JetBlue would raise fares and reduce competition. Airlines had argued that this would improve their competitiveness, especially in the United States, where four airlines control about three-quarters of the market.
“Spirit is a small airline, but there are people who love it,” Young wrote in his ruling. “Dear Spirit customers, this is for you.”
Some analysts expect Frontier and Spirit to resume talks in the coming months.
