Spirit Airlines Finally Files for Chapter 11 Bankruptcy

Spirit Airlines, as Norman Greenbaum sang in his 1969 classic, may soon be “goin’ up to the spirit in the sky.”

On Monday, the budget airline and sworn enemy of widely accepted standards or necessary legroom filed for Chapter 11 bankruptcy. 

Clipped Wings

For decades, Spirit Airlines filled a necessary niche in the airline market, offering budget-conscious consumers a cost-friendly option. In other words, it won the race to the bottom in creature comforts. But both budget rivals and big airlines have recently narrowed the price gap (without sacrificing what remains of airplane amenities, like, say, a cup of water).

The company hasn’t reported an annual profit since 2019, and has lost some $2.2 billion since 2020. In recent years, antitrust regulators have dashed merger dreams with both Frontier Airlines and JetBlue over fears of decreased competition in the budget-airline space — all as Spirit warned that it would sooner or later fail on its own. On Monday:

• Spirit said in a statement that it has reached a restructuring agreement supported by a supermajority of its bondholders, who have provided commitments for a $350 million equity investment, a $300 million loan to finance bankruptcy proceedings, and will swap some $800 million of their holdings into equity in a reorganized Spirit.
• The company had been operating with a debt load of around $3.6 billion. With the proposed bankruptcy plan, it says that would reduce by around $795 million, according to court papers. Its stock has been delisted from the New York Stock Exchange.

Join the Club: Airline bankruptcies used to be slightly more common. In the 1990s and early 2000s, PanAm, Continental, United, and others declared bankruptcy — a death knell for some, a new beginning for others. In 2013, American Airlines emerged from bankruptcy while merging with US Airways. What’s next for Spirit is unclear as the antitrust environment begins to shift, but in a letter to passengers Monday — 10 days ahead of Thanksgiving — the company promised to continue operations. Just don’t forget to pack your own water.