Last week I wrote that Spirit Airlines was expected to file bankruptcy as merger talks with Frontier broke down. That’s now exactly what they’ve done to start off the week.
As with past bankruptcies by American Airlines (and US Airways), United Airlines (and Continental), and Delta Air Lines (and Northwest), Spirit expects to continue normal operations and honor flight credits and miles through traditional first-day motions with the bankruptcy court.
In its filing, the airline lists:
- Total Assets: $9.49 billion as of September 30, 2024
- Total Debts: $8.99 billion as of September 30, 2024
- Notable creditors include Wilmington Trust (Convertible Notes: $525 million), U.S. Department of Treasury (Unsecured Term Loan: $136 million from pandemic-era CARES Act), and several operational trade payables (e.g., Lufthansa Technik, Microsoft Licensing, International Aero Engines, Gat Airline Ground Support).
- Key shareholders include U.S. Global Jets ETF (10.96%), The Vanguard Group, and BlackRock, Inc.
Spirit has negotiated a Restructuring Support Agreement with major creditors including launching an Equity Rights Offering and pursuing a debtor-in-possession (financing arrangement: $350 million equity investment from existing bondholders and plans to convert $795 million of debt to equity. Current bondholders are planning to provide $300 million debtor-in-possession financing (superpriority loans to maintain liquidity during bankruptcy, with robust protection terms for lenders).
According to aviation analytics company Cirium, Spirit has been operationally reliable cancelling about 0.71% of flights in 2024 (behind only Southwest) and has operated approximately three quarters of its flights on-time. The carrier represents about 5% of U.S. airline capacity and is the only airline offering flights out of Latrobe, Pennsylvania, and Atlantic City, New Jersey. Spirit’s average fare in June and July was $68 one-way, excluding taxes and fees, compared to an average of over $200 for American, Delta, United and Southwest.
The airline will flying, though we can expect to see further route adjustments. Spirit’s mileage program (such as it is) gets continued – after all, it’s one of the most valuable assets the company has, and already mortgaged (with covenants that prevent actions that would diminish its value). Over time any reduction in service from Spirit does mean higher fares, though their aircraft would largely remain in demand.
Spirit Airlines wouldn’t have had a problem, of course, had the Justice Department not blocked JetBlue’s acquisition of the troubled carrier. It wouldn’t have mattered that its business model wasn’t a great product-market fit to the current environment, since JetBlue didn’t plan to keep the business model. JetBlue wanted Spirit for the pilots and planes to grow in ways necessitated by its partnership with American Airlines, which is expected to be back on the table with the turnover in administrations.
Spirit has set up a bankruptcy website at SpiritGoForward.com. You can find case documents, including the bankruptcy petition, here.
Buh bye Spirit Airlines.
Like I said in the earlier posting, chapter 11, restructuring, not 11, liquidation, so they will continue to fly for now.
Will EBT still be accepted as a form of payment for flights? Their target market needs to know this.
@ LTD — You’re another of the clueless people who have never flown Spirit. There is nothing wrong with their passengers.
Red flag – your new date has status on Spirit airlines.
What the DOJ wants the DOJ gets.
just a reminder that NK had a merger proposal w/ F9 which was interrupted by B6 which tried and succeeded at topping F9’s offer.
The DOJ saw a merger proposal between two ULCCs get unwound because a higher cost LCC came in because they were afraid they would be marginalized in the industry.
After B6’s proposal was rejected, F9 came back and reinitiated discussions with NK but by this summer it was apparent that NK could not successfully restructure outside of bankruptcy so F9 walked away.
F9 is not in great shape itself but has made far better decisions about when to walk away than other carriers.
It is possible that F9 and NK might merge at some point in the future but NK will probably be the financially stronger merger.
Don’t ever doubt that the DOJ acted based on a much better understanding of the industry than some want to give them credit for