Spirit Airlines Grounded: Budget Carrier Files for Chapter 11 Bankruptcy

Spirit Airlines has filed for Chapter 11 bankruptcy protection following the collapse of its merger efforts and spiraling financial losses, according to The New York Times. The budget airline, known for its ultra-low cost travel strategy, struggled to make its business model sustainable, resulting in hundreds of millions of dollars in losses. Adam Moreira / Wikimedia

The company's bankruptcy filing comes after a $3.8 billion deal to sell itself to JetBlue was blocked by a federal judge and previous attempts to merge with rival Frontier Airlines fell apart. Spirit aims to emerge from bankruptcy as a more sustainable company, similar to how American Airlines and United Airlines did in the past. Funforme3 / Wikimedia

Spirit Airlines has secured the support of a super-majority of bondholders for its reorganization plan and expects to emerge from bankruptcy quickly. The airline has assured customers that tickets, credits, and loyalty points can be used as normal, and future flights can still be booked.

"There is a good chance Spirit emerges in better financial health and could attract private equity investment to help along the way," said Pitchbook senior analyst for industrials Jim Corridore. Raymond Wambsgans / Wikimedia

Spirit Airlines has been facing financial troubles for years, losing money in 17 of its last 18 quarters, including about $336 million in the first half of 2024. The company has accumulated $3.6 billion in debt, of which it plans to restructure $1.64 billion and cut nearly $800 million. MarcelX42 / Wikimedia

The airline, which employs over 21,000 people, including 3,400 pilots and 5,800 flight attendants, has offered cheap fares by implementing "high-density seating." Spirit operates a fleet of 213 Airbus aircraft, of which 162 are leased. Tomás Del Coro / Wikimedia

The bankruptcy filing follows the Biden administration's opposition to Spirit's deal with JetBlue, with Attorney General Merrick Garland arguing that the deal would lead to "higher fares and fewer choices" for customers. Spirit CEO Ted Christie had argued that the deal would save consumers hundreds of millions and create a real challenger to the dominant Big 4 U.S. airlines. United States Department of Justice / Wikimedia

As Spirit navigates bankruptcy, there is speculation about whether the airline might attempt to revive a deal with JetBlue or Frontier once Donald Trump takes office. Brad Penner-Imagn Images