Spirit Airlines files for Chapter 11 bankruptcy amid mounting losses and merger fallout

Spirit Airlines, the largest budget carrier in the United States, filed for bankruptcy protection on Monday, marking a significant development in the company’s years of financial struggles. According to EuroNewsthe airline has been reeling from the combined impact of the COVID-19 pandemic and a failed merger, both of which have contributed to a staggering loss of more than $2.5 billion (€2.4 billion) since 2020.

Per the lawsuit, Spirit has listed assets and liabilities in the $1 billion (€950 million) to $10 billion (€9.5 billion) range, indicating the extent of its financial distress. However, the company has assured passengers that its operations will remain uninterrupted during its Chapter 11 bankruptcy process. “The most important thing 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 reaffirming the airline’s commitment to maintaining service amid restructuring.

According to EuroNews, Spirit’s bankruptcy filing follows a steady decline in share value. On Friday, Spirit’s shares fell 25% after reports emerged The Wall Street Journal that the airline negotiated with the bondholders about possible terms for a bankruptcy. That drop contributed to a much bigger slide in Spirit’s stock, which has lost 97% of its value since late 2018, when the airline was still profitable.

Read more: JetBlue and Spirit Airlines push back on law firms’ bids for legal fees in abandoned merger case

The company has reportedly entered into an agreement with its bondholders to secure financial support during the restructuring. The deal includes a capital injection of $350 million (€332 million) along with $300 million (€284 million) in debtor-in-possession financing, aimed at stabilizing operations as Spirit resolves its mounting debt obligations.

CEO Ted Christie confirmed in August that the company was prioritizing discussions with advisers and bondholders about upcoming debt maturities. “We are focused on refinancing our debt, improving our overall liquidity position, implementing our new reimagined product to market and expanding our loyalty programs,” Christie said during an earnings call earlier this year, expressing optimism about the airline’s efforts to manage its liquidity challenges.

Despite financial difficulties, passenger numbers have shown a modest increase. According to EuroNewsSpirit Airlines saw a 2% increase in passenger miles flown in the first half of this year compared to the same period in 2022. However, increased demand has not offset lower average fares, further weighing on Spirit’s revenue as it navigates one of the most challenging periods in its history.

Spirit’s bankruptcy filing marks a new chapter for the airline as it pursues a complex restructuring process to stabilize its finances.

Source: EuroNews