Spirit Airlines, Inc. has filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York as it faces increasing financial losses and debt. The company anticipates that this restructuring will lower its debt burden and enhance its financial flexibility. In a message to its customers, Spirit Airlines referred to the move as a proactive measure aimed at positioning the airline for future success.
In early trading on the New York Stock Exchange, Spirit’s shares dropped by approximately 5.6% to $1.02. This decline follows a significant 18.2% drop last Friday, when shares closed at $1.08.
The airline's merger with JetBlue Airways, which was expected to occur in March 2024, was canceled after a U.S. court halted the merger citing competition concerns. Spirit Airlines has stated its intention to maintain regular business operations during the prearranged and streamlined Chapter 11 process, which is projected to conclude in the first quarter of 2025.
Spirit Airlines has signed a restructuring support agreement (RSA) with a supermajority of its loyalty and convertible bondholders that outlines a comprehensive restructuring of its balance sheet. The company has secured commitments for a $350 million equity investment from existing bondholders, which will assist in a transaction to convert $795 million of existing funded debt into equity.
Additionally, existing bondholders are providing the company with a $300 million debtor-in-possession (DIP) financing. This financing, combined with Spirit’s available cash reserves and operational revenue, is expected to support the airline through the bankruptcy process.
As a consequence of the bankruptcy filing, Spirit foresees being delisted from the New York Stock Exchange shortly. Nonetheless, its common stock will continue to trade in the over-the-counter market during this period.
Spirit has reassured its customers that they can continue to book and fly with no disruptions, with all tickets, credits, and loyalty points remaining valid. The Chapter 11 process will not affect employee wages or benefits, which will continue to be paid. Payments to vendors, aircraft lessors, and secured aircraft debt holders will also proceed as usual without impairment.
Ted Christie, President and CEO of Spirit Airlines, expressed contentment over reaching an agreement with the bondholders, stating that it reflects strong confidence in Spirit’s long-term strategy. He emphasized that the recapitalization will significantly strengthen the company’s balance sheet while allowing it to pursue strategic objectives.
Previously, in late October, Spirit disclosed in a regulatory filing its plans to achieve annual cost reductions of approximately $80 million starting in early 2025, as part of its efforts to return to profitability. These savings are expected to stem primarily from workforce reductions in line with anticipated flight volume.
