Spirit Airlines was once the envy of the airline industry. It had the best margins and generated a strong return, making air travel available to more people and stimulating demand by passengers who weren’t flying otherwise. They had lower costs than competitors, lower fares, and customers adapted themselves to Spirit’s business model to save money.
However, consumer preferences changed and the pandemic exacerbated this. Passengers increasingly wanted a premium product that Spirit wasn’t positioned to sell. It had one of the most toxic brands in any industry.
And they began losing their cost advantage. They paid as much for planes and fuel as everyone else, and labor costs were rising. They tried to sell themselves to JetBlue, but the Biden administration successfully blocked this. That was a fatal error – as it could leave Spirit out of business, meaning reduced competition.
Spirit Airlines just issued a warning in its latest SEC filing that they may not last 12 months as a going concern. Their second quarter 10Q filing contains this disclosure:
Because of the uncertainty of successfully completing the initiatives to comply with the minimum liquidity covenants and of the outcome of discussions with our stakeholders, management has concluded there is substantial doubt as to our ability to continue as a going concern within 12 months from the date these financial statements are issued.
The airline indicates that their turnaround plan is not enough. They are concerned about:
- breaching minimum liquidity covenants in their debt obligations
- credit card processing agreement requirements not being met
- the need for a new credit card processing agreement for 2026 – and the expectation that will mean “additional collateral” required (because the processor doesn’t want to be on the hook for chargebacks if Spirit goes under)
And so they’re looking at the sale of additional assets like planes, real estate and gates and “elimination of certain fixed costs.”
Of course, they’ve warned of their ability to continue as a going concern consistently during and after bankruptcy.
That shouldn’t diminish concern over this new disclosure. On the contrary, (1) they haven’t gotten themselves out of this mess – their turnaround plan hasn’t worked! – despite warnings this was coming, and (2) things continue to get worse as they risk breaching covenants.
They probably shouldn’t have rejected the lifeline that Frontier Airlines threw them earlier this year.
Almost sent her with the luggage pic.twitter.com/K1JlcTtzOe
— DJ Kam Bennett (@KameronBennett) November 13, 2024
Of course, they could make it! They could pull a rabbit out of a hat. And for now they continue business as usual, albeit making greater changes to their route network. But since they’re telling us they might not be around in a year, I say we should believe them. And that means not buying travel far out into the future.
Indeed, I probably wouldn’t buy Spirit Airlines tickets for travel more than a couple of months out – within a period I’d be confident I could dispute the charges if travel weren’t honored. I also wouldn’t be accuulating their miles – but I wasn’t doing that to begin with.
(HT: Enilria)
Biden administration screwed Spirit and JetBlue
If you’d like elite access to a premium travel experience, please consider Delta.
Delta ? Are they still in business ? The Ponzi scheme of airline programs
I’ve never flown Spirit before – maybe I should try the Big Front Seat at least once before its too late, as a bucket list item.
@Matt strikes again!
And if people stop buying travel for further out, that’ll hasten the demise – without the cash upfront to operate current flights, they’ll just go down faster.
I’ve got no skin in this game – I do fly but never, ever would I fly an airline like Spirit. I understand it works for some, but definitely not for me.
@Dwondermeant Delta – the most profitable airline in US history!
The Delta Difference
It was so wonderful of Pocahontas from Massachusetts to destroy their ability to merge with JetBlue. It may not have even worked out for JetBlue to have acquired them, but nonetheless, they would’ve been much better off and now look. Good job Elizabeth Warren, you, a thief of $400,000 from Harvard and someone who lied about their heritage to get advantage have destroyed the lives of how many people with this action?
Two words come to mind.
People Express.
It doesn’t take someone that is dyslexic and can’t spell airline to tell you that Spirit is in deep doo-doo.
Spirit is publicly traded again and they filed their quarterly report to stockholders with the SEC today which says
“If these initiatives are unsuccessful, management believes it is probable that the Company will be unable to comply with the minimum liquidity covenants under
the Company’s debt obligations and credit card processing agreement at some point in the next 12 months, which would result in an event of default (in the case of the
Exit Revolving Credit Facility, if there are amounts drawn and outstanding under the Exit Revolving Credit Facility at that time), which could cause the maturity of the
Company’s debt obligations to be accelerated. Because of the uncertainty of successfully completing the initiatives to comply with the minimum liquidity covenants
and of the outcome of discussions with Company stakeholders, management has concluded there is substantial doubt as to the Company’s ability to continue as a going
concern within 12 months from the date these financial statements are issued”
Frontier isn’t making money but has slightly better liquidity.
and let’s not forget that AA has been skimming just about the surface with minimal profitability for well over a decade.
It’s time for the shakeout that didn’t happen post covid because of taxpayer bailouts that, if they had not happened, would have taken down most of the industry except for DL and WN who had access to billions of dollars in lines of credit.
and let’s be clear that United, despite the fact that their CEO loves to trash talk the rest of the industry except for DL, did nothing to push NK closer to the cliff .
@L737 — @Matt’s still got it! Keep climbing! 100 more years! Doo doo!
$50 per flight clientele breed results like this. Let them go under, and let their trash clientele take a greyhound.
Feds should have left the Jet Blue merger alone.
If it goes belly up, who will pick up the scraps?
@IsaacM — Yes! I enjoyed actually getting access to Admirals Clubs when flying jetBlue; this new United partnership doesn’t include UnitedClubs when flying B6, which is lame.
@Tim Dunn — That’s super pessimistic, pal. Like, did I make a mistake opening the Quest card? Are my bonus United MileagePlus pointies gonna be worth-less or worthless? And all these Citi transfers to AA, was that a mistake, too?! How long do I have doc??
What was “the turnaround plan” that failed?
I’m so glad Biden and the idiot democrats who couldn’t manage their way out of a wet paper sack decided that they knew what was best for competition and smaller airlines by bankrupting them. Thankfully the adults are back in charge, not the delusional activists.
Maybe you should try reporting facts instead of feelings. As somebody with friends who work for spirit I know this to be untrue.
SO SPIRIT – IF YOU THINK YOU WON’T SURVIVE A YEAR, WHY ON EARTH DID YOU TURN DOWN THE MERGER WITH FRONTIER????????????????????????????????
ALL YOU COMPLAINERS SAYING LET SPIRIT GO UNDER AND THEIR $50 FARES – YOU’LL BE THE FIRST ONES CRYING WHEN IT BECOMES FAR MORE EXPENSIVE TO FLY. LESS COMPETITION
Time to burn, baby burn. How many BFS trips for 2 will it take to burn through 150,000 miles? Maybe 7?
Flew them once many years ago on July 4th DTW-LGA no AC it was boiling summer of 2002, NEVER set foot on them again. BUT I dont want them to go under either, if they go and JetBlue goes as well, fares will go thru the roof, like they havent (dont know why Trump gave the Carriers Billions during Covid at best an interest free loan and every devaluation and up fares is another Thanks Suckers!)
So all who are not shedding a tear for Spirit, just wait till they are no more and an award tkt NY-LAS is 100,000 1 way or $1200 since the Carriers will know either pay up or Greyhound it
Well honestly, Sprit was never a TW, PA, or TZ for that matter. I think it was predicted early on the turn around plan was insufficient from the get go.
Time for a lot of reflection regarding the best decisions for all to make going forward at this time i should imagine but as all know things can limp along for quite some time.
Spirit airlines never made much money on investor’s capital. Its.margins may have been “high” but they never returned much on assets (think of this measure as the interest rate you earn on your money, which is the only relevant one) because for every dollar invested in the business they had dismal revenues.
You should know better than post irrelevant information.
At the end, people tired of their dismal product – YOLO, and the worst way to spend your only life is on a Spirit plane when for a few bucks more you can get better service and a screen on United or American.
*Delta, obviously not American! Sorry.
I used Sprit, big front seat, all the time to go from Denver to Fort Lauderdale. Spirit offered a red eye to FLL and a 9:30 PM flight back to Denver. Those times gave me an extra day to spend with my mother. The big front seat was very roomy. I was sad to see them drop Denver. I was interviewed on TV about it:
https://kdvr.com/news/local/spirit-airlines-to-end-service-at-denver-international-airport/
Here’s to hoping delta is next in bankruptcy
I expect Southwest- er – Southworst to soon follow suit.
So Biden killed Spirit. Of course, a retort could be that if Biden didn’t kill Spirit, Spirit would just live a little longer, maybe 3 years more.
It seems that a Spirit like model works in Europe. Ryanair, Wizz Air, EasyJet, Transavia, Vueling are among them. I was thinking of flying one of them but my rollaboard is technically non-compliant. It is minimally too long because of the 2 wheels. I flew EasyJet years ago and they didn’t catch my bag.
OMG! This is the second best news that I’ve heard this year! What will be the first? When Spirit actually announces their shutdown & end of operations. And for EVERY SINGLE employee of Spirit Airlines that is reading this don’t think that you will get a job at another US carrier. You folks are tainted & diseased & have done nothing but drag the industry down to s””” level. Spirit…..the same very place that your passengers use for a toilet. No HR department would allow the cancerous thinking & training of a Spirit employee through their front door.
Let the Greyhound bus people return to buses & bring on civilized flying again in the United States. And Frontier Airlines is next my friends as the US3 have much, MUCH deeper pockets. Both airlines have one, and only one thing of value & that is landing slots. Period. End of story.
@Mantis @derek — It’s more than half-way through 2025; some insist we’re living in a ‘golden age,’ thanks to our Dear Leader’s brilliant economic prowess. So, if a company goes under now, is it really the last guy’s fault? Like, what is the cut-off date? Or, was it the ‘Autopen’ that did this… darn.
@Meme — Highly doubtful, but can’t stop you from ‘wishing’ for things that aren’t likely to happen.
@Nunya — There’s still a LLC and ULCC segment base in the USA; as consumers (and workers), we should want robust competition (more options, lower fares, more jobs, etc.) However, it doesn’t always last (see Silver for a recent example).
@Johnmcsymthe — We all at times enjoy using Spirit (or Frontier, etc.) as a punching bag; however, calling your fellow human beings ‘diseased’ is a bit too far. Those employees have valuable experience, and other airlines will want to poach that talent, especially as there are shortages for pilots (and other aviation industry roles).
If Spirit folds, who benefits:
– B6 picks up more PAX at MCO & FLL (focus city overlaps)
– All scramble for NYC & ORD & LAX gates
– F9, G4, B6, MX have one less competitor in the ULCC strata
– I didn’t include WN in the above for their transition to the traditional trunk line format (see next line)
– little to no impact for AA, DL, UA & AS & WN
– approximately 120 NEO jets become available with 50 orders also open to other carriers
– approximately 70 CEO jets on the open market for airlines looking for a good deal
– approximatley one or two NEO & several CEO jets dismantled alleviating the current parts shortage
– slight fare increase at NK focus cities (LAS, DTW, MCO), but others fill in the gap
Spirit will be a foot note in the long list of defunct airlines. Record COVID as the antagonist.
Funny. No one mentioned the fact Spirit’s high costs are from parked airplanes (45 ish) with no engines on them. Pratt and Whitney still has a year to 2 year backlog to get those engines inspected/ repaired. No one mentioned Pratt and Whitney is the main culprit for Spirit’s unfortunate position. A company can’t make money paying the lease on an asset that isn’t generating revenue for them. The engine issues are not the companies fault. And the $150 million reimbursement Pratt & Whitney issued Spirit for the remainder of this year is a complete joke.
if it’s below you to fly on Spirit, don’t.
If you think it’s employees are subpar? You are sadly mistaken. Dispatchers. Pilots. Mechanics. FAs. Make it happen and especially under the last 3 years. No accidents. People doing their jobs safely. Think about that next time you want to disparage them.
Spirit is done unless the government steps in and saves them. A real possibility. Hopefully not, and looking at Frontier’s latest financials that airline is also headed towards the same fate.
Maybe then legacy airlines will go back to treating passengers like adult humans and not chickens on the back of a chicken coop flatbed. Although I have my doubts that will happen.
This will also hopefully but a stake in the 1. Let’s cater to the bottom of the barrel in society 2. We can make up for a loss on every transaction but having more transactions mentality.
So is Southworst next?
@George Romey — You know better; this administration won’t save anyone, unless the company or individuals pay our Dear Leader a bribe, and even then, maybe not. Besides, our government isn’t supposed to ‘bail out’ anyone anyway, unless there is a strategic reason to do so, I guess (see ‘the pandemic,’ or ‘too big to fail’ and the 2008 financial crisis).
@Bill Frontier had a lost before taxes (benefit) of $70 million in Q2 after a loss of $40 million in Q1. So your theory doesn’t hold water. Frontier is headed in the same direction.
An airline can’t lose money on every fare but make a profit by buying, packing and flying more 321neos.
All 6 of Spirit’s employees will be sad. The bulk of their employees are contractors and day laborers. Nobody Spirit gives a shit about anything because they don’t actually work for Spirit. When Spirit goes bust, the gate, ramp and ticket counter people will simply be shifted to another airline that their company provides contract “service” for. This will probably be a pretty smooth fold. As for pilots and flight attendants demanding their exorbitant contracts…..you did this to yourselves. You’ve put yourselves out of a job. “UNION STRONG”!!!!
@CHRIS — Nah, unions aren’t the issue with Spirit, but nice try. Some of y’all really just hate workers. Do be sure to mention that next time you fly… like, tell ‘em how you really ‘feel’… and enjoy your beverages, too. Yum.
The creditors in the bankruptcy clearly were not serious about implementing a turnaround plan. They kicked the can (shortly) down the road to allow for short-term trading and, for those with a long-term hold strategy, in the hopes that a Trump administration would be more favorable and let them execute on a merger with [X] on more favorable terms. Cue the smoke blowing up someone’s you know what in 3, 2, 1…
I can tell you. There are a lot of tears being shed around my mobile home park.
With the passage of the “Smash and Grab Tax Act of 2025” the poorest people in the country are going to fall even further behind. Saw an estimate of $1200 loss per year due to slashing Medicaid and the spiking prices of food.
Those tend to be Spirit’s passengers. Not a good trend when your customers are getting economically hammered.
@1990 this administration is still blaming Obama and Bill Clinton for things that happens years ago. You can’t possible believe this has anything to do with dear leader.
@Parker — And I’ll still blame Reagan. Yeah, it doesn’t really solve anything. Wish there was less performative nonsense and actual solving of problems affecting most people. Yet, no real ‘help’ on affordability; we’re headed into recession; best they got for us all is a reverse-Robin Hood and scapegoating brown people. *sigh*
@1990 DL just announced a 20% reduction in winter flying out of LGA and JFK. Travel is down and it’s really down in places like FL, Vegas and other destinations dependent on international visitors. Six of the ten largest US airports are down with respect to Y/Y passenger volumes. I’m sure that’s Biden’s fault too and has nothing to do with the fact that we’ve p!ssed off a lot of our allies. Civilized nations are telling their citizens NOT to travel to the US. Doesn’t matter why. Doesn’t matter if they right. It’s what they’re doing and our economy is taking a hit.
The only reason the big four and not in a financial tailspin is that their revenue is coming from credit card deals and selling miles to other companies. Without those deals DL and the others would be in a lot of trouble.
The top rate for income tax should be capped at 20%.
And don’t forget 50% of Americans pay 0.
The BBB was much needed and long time coming. We need to go after the rest of the handout And entitlement programs, I’m sick of paying for people I can barely tolerate.
@Parker — Ahh, moderate turbulence ahead. Fasten seatbelt sign is on. Flight attendants to your jump seats.
@Walter Barry — I presume you’ll send back your Social Security check, right? Because those ‘entitlements’ that you hate might also be going… to you. You don’t have to accept it; like, do your part, walk the walk, decline it. Thanx.
The going concern warning is mandatory, either they issue it or their auditors do it. Debt covenants are routinely waived or renegotiated, if they fail the debtors will be in a much worse position. Could be a whole lot of nothing here.
The lucky ones are the Spirit pilots getting furloughed, they’ll be first to be hired at the big 4. Spirits announcement that they won’t last a year will open the floodgates of the skilled labor (mechanics, dispatchers, pilots) running for the door and exacerbating NKs demise. I’ve flown NK a few times commuting LAX-MCI. Seats were hard as rock, but a free ride home is still a free ride.
Brad,
those debtors can and will redeploy their assets to other airlines that can redeploy them more effectively and profitability.
If we were talking about one of the big 4, you might be right but NK is a small carrier with no strategic significance.
Well the only thing I get from this Hail Mary, announcement is:
1) The NK brand has an expiration
2) Focus will be end of 3rd quarter
3) A pre-packaged bankruptcy asset acquisition and divestment will be a possible result but to whom.
4) NK workforce will likely be affected
5) Allegiant is signaling an added complication for NK or something potentially different.
6) Gut instinct says American has the potential to gain market share most.
7) Creditors and Aircraft leasing companies will be gambling and watching and hoping to figure out what will be the best course of action.
8) Attrition and recruitment will likely suffer.
9) More deck chair rearranging for better or for worse.
klima,
NK just emerged from chapter 11. There likely isn’t anything else that can help.
The warning means that NK might just go to chapter 7 liquidation; it happens very rarely in the airline industry but it isn’t often that airlines issue a statement of concern as an ongoing entity within 3 months of emerging from chapter 11.
DL has the biggest overlap with NK which has a large presence in DTW; DL is also the largest legacy carrier at FLL.
And, yes, employees always pay the highest price