What happens to my flight now that Spirit Airlines has filed for bankruptcy?

The Troubled American Budget Company Spirit Airlines has applied for “bankruptcy protection” after losing more than 2.5 billion. USD since 2020 – and not having secured agreements with two possible suitors.

The company says it “has commenced a voluntary pre-arranged Chapter 11 process in the United States Bankruptcy Court” that “will allow it to emerge as a stronger company”.

When many passengers hear the words “bankruptcy” and “airline” they may reasonably assume that the airline has closed down – as has happened in the UK recently with Thomas Cook, Monarch and Flybe (twice).

In fact, Chapter 11 bankruptcy is a procedure many airlines have used over the decades – including giants like American Airlines. The process is known as “car washing” i the aviation industrybecause of the way it refreshes the airlines

These are the most important questions and answers.

What has gone wrong at Spirit?

Florida-based Spirit is the largest ultra-low-cost carrier (ULCC) in the United States. It has a main base in Fort Lauderdale along with crew bases at many of the largest hubs in America: Atlanta, Chicago O’Hare, Dallas-Fort Worth, Detroit, Houston Intercontinental, Las Vegas, Miami, New York Newark and Orlando. Its all-Airbus network extends into the Caribbean and northern Latin America.

The company’s mission is this: “We are dedicated to pairing great value with excellent service while reinventing the airline experience. We enable our guests to venture further, travel often and discover more than ever before. We believe it should be easy to go and have fun.”

Unfortunately, Spirit was hit hard by Covid. A proposed merger with the other major ULCC, Frontier, was scrapped in 2022 when jetBlue marched in with a better offer. The takeover was blocked by a federal judge on competition grounds. New talks began with Frontier but fizzled out.

Since the start of 2024, Spirit’s share value has fallen by almost 80 per cent. On November 12, the company announced a 12 percent decline in operating margin “due to lower total operating income and higher total operating expenses.” Between July and September, turnover was DKK 61 million. USD (48m GBP) lower than the corresponding quarter last year, with costs up by 52m. USD (£41m) due to “an increase in aircraft rental expenses, other operating expenses, salaries, wages and benefits, and landing charges”.

What happened then?

Spirit has been working with the bondholders it owes money “on the terms of a comprehensive balance sheet restructuring.”

The goal: “To reduce Spirit’s debt, provide increased financial flexibility, position Spirit for long-term success and accelerate investments that provide enhanced guest travel experiences and greater value.”

Ted Christie, Spirit’s president and CEO, said the agreement with creditors for “a comprehensive recapitalization of the company” was “a strong vote of confidence in Spirit and our long-term plan.”

Spirit has filed for Chapter 11 bankruptcy in New York.

What exactly does Chapter 11 bankruptcy entail?

The aim is to keep a business running while it restructures debt – for example by extending the term over which it must be repaid. New agreements can be concluded with trade unions, which give the company the opportunity to reduce its costs.

Creditors often see an advantage in relaxing their terms to ensure they are repaid rather than seeing the business close down – leaving many people owing money.

What does this mean for the passengers?

Spirit assures passengers:

• You can continue to book and fly now and in the future.

• You can use all tickets, credits and loyalty points as normal.

• You can continue to benefit from our Free Spirit loyalty program, Saver$ Club perks and credit card terms.

• Our amazing team members are here to offer you excellent service and a great experience.

What about the staff?

Spirit says, “Even the Chapter 11 proceeding will not affect Team Member wages or benefits, which continue to be paid and honored for those employed by Spirit.”

How long will the restructuring take?

The company says: “We expect to complete this process in the first quarter of 2025 and appear even better positioned to deliver the best value in the sky. Other airlines operating successfully today have completed a similar process.

“As we head into the holiday season and beyond, we look forward to welcoming you back on board soon.”