Spirit has been trying to put off bankruptcy by route cuts, getting rid of aircraft and shedding workers.
Frontier was looking to buy them, despite all of their troubles. They had previously been outbid by JetBlue in a merger attempt that was successfully blocked in court by the federal government.
Now it appears that’s off, and a Spirit bankruptcy is likely.
Spirit Airlines is preparing to file for bankruptcy protection after merger talks with Frontier Airlines broke down, according to people familiar with the matter. The Florida-based budget airline is in advanced discussions with bondholders to hammer out a bankruptcy plan that would have support from a majority of creditors…Frontier decided not to move forward with such a merger at this time…
BREAKING: Spirit Airlines' potential merger with Frontier breaks down, now preparing to file for bankruptcy$SAVE down 42% after hours pic.twitter.com/q7cmou2L8x
— Exec Sum (@exec_sum) November 12, 2024
It’s unclear why talks between Spirit and Frontier broke down. Perhaps Spirit wanted something for shareholders, and all Frontier would do is something like ‘$1 and assumption of debt,’ or perhaps Frontier sees a better opportunity to acquire the assets in bankruptcy with bondholders taking a haircut.
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.
Any bankruptcy would likely mean continued flying, albeit with further route adjustments. Spirit’s mileage program (such as it is) would continued – 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.
And we can thank the Biden hyper aggressive A-holes for preventing a merger that might have prevented this. Let’s Go Brandon.
Thanks Biden for saving us from the certainty of cruel, evil, monopolistic behavior by the 6th largest carrier. Phew!
@ EdSparks58 — And soon, we can blame the idiot-elect for running the entire world’s econony into the ground. It will be grand.
Let’s hope Trump’s DOJ department isn’t down with that anti competitive crap American and JetBlue tried with the Biden administration.
@Atiya – In fact, the JetBlue-American partnership was approved during the Trump administration?
@ Atiya — Whatever lines Trump’s pockets is what we will have in Merica.
I would imagine they attempt chapter 11 (reorganization), not 7 (liquidation), in hopes of waiting things out for the next administration, then re-attempt the sale/merger again. Or not, we’re all just speculating here.
The planes are so valuable, and most are leased, so wouldn’t a chapter 7 be more likely?
The DOJ under the current regime made Spirit Airlines radioactive so it is no wonder that an approved white knight cannot be found. A sad situation for employees and investors.
Reduce the debt and then Frontier will be back for a post-bankruptcy acquisition. Spirit should have accepted their initial $3B offer before the JetBlue debacle. Sometimes the highest bid isn’t the best deal.
Thanks, Joe…
Surprised Spirit made it this far. Don’t fly to Haiti.
@Gary Why is the low cost carrier model successful in Europe, Ryanair, Easyjet etc,, but a failure here?
When the scamdemic PPP, EBT, Klarma, advanced paycheck title loan revenue stream dries up, times get rough.
@ DunkinDFDubya — The flow will resume shortly when the PPP masterminds are back in charge. The next scam against the taxpayers is right around the corner.
@Johhny – the ultra low cost carrier model was the most profitable here in the U.S. until the pandemic! Since then, the cost advantage eroded (wages went up at the ULCCs), the airlines didn’t go where people wanted to fly, and didn’t have the (premium) product people wanted to buy.
I like Spirit a lot but at this point they have had too much reputational damage done to them and to themselves. I think a JetBlue merger might of worked. An Alaska merger might have made some geographic sense and I don’t like Frontier but I guess they could have made that work (We all want to be delayed in Denver on every flight now don’t we :). At the end of the day, they got knee-capped by the Biden administration and JetBlue was forced to overbid which could have ended in disaster. Liberals might say that the public was protected from an evil Capitalist takeover by JetBlue that would have reduced competition. So, the result is one or maybe two bankrupt airlines that could pull back from markets that will end up with much higher fares. I don’t see how the traveling public wins?
The clowns at Biden’s DOJ overreacted to the Jet Blue/Spirit merger. It was clear at the time, and now it’s definitely obvious even to the most clueless.
Can you imagine the chaos this coming Xmas & New Years should NK file Chapter 11. I would imagine NK will stall till the Trump administration is in office come January. Till then, think of those with canceled flights fighting for a refund; those wanting to travel jumping on limited space on other airlines; and NK employees not sure if they will have a job come Xmas. Let’s not forget all the vendors, big and small owed money by NK while the attorneys rake in billable hours.
Glad I bought my Xmas tickets on another airline a month ago! Space will be tight during the holidays.
@Gene If an idiot can become a billionaire and also president, then I want to be an idiot.
Spirit will likely emerge from Chapter 11 but unless the airline can transform itself more into the LCC business model (which admittedly is also struggling) it will be back into bankruptcy within 2-3 years. The wild cards would be creditors going for an offer in which parts of the airline are split up and sold to various other airlines, if workers are told to take a haircut and how that plays out and any economic changes that impact air travel.
But clearly $49 fares with the hope of a litany of fees collected ain’t working.
@George N Romey
Spirit is already the most notorious low-cost carrier (LCC) in North America. So, I was confused by your statement that you expect the airline to ‘transform itself into more the LCC business model.’ Are you suggesting that Spirit is currently an ultra-low-cost-carrier (ULCC)? Or did you misuse the acronym LCC, when you meant to say ‘legacy’ carrier (like American, Delta, United). If so, I doubt Spirit would transform into that business model alone, because obviously it lacks the capital to do so, unless it merged with another larger airline, like what it and jetBlue were attempting before. One could argue that jetBlue has somewhat made the transition from LCC to legacy by offering ‘Mint’ business class and other enhanced amenities. I happen to like jetBlue and think this could be the best case scenario. It seems more likely now that anti-trust is dead.
@ Bestonik Dooley — Sorry to hear that you think it’s OK to be a treasonist, racist, pathological lying rapist, as long as they ends justifies the means. This is precisely what is wrong with Merica.
Whatever you think of the reasoning, it does seem like DOJ saved B6 from their own leadership.
Now they might get NK assets at a significant discount!
It’s hilarious all of the people criticizing the “Biden DOJ”, etc. Meanwhile, the judge who actually blocked the merger was a Ronald Reagan pick (U.S. District Judge William Young).
Some people here ( usually from the MAGA crowd) are simply too dumb to understand any nuances.
Only another Atlantan would know who Bestoink Dooley was! Back to the topic…Some of the low cost carriers in the United States seem to have it together. Frontier is kinda sloppy with the way they treat their employees. One doesn’t hear too many bad things about Allegiant but Spirit…what a crap hole airline! They hire ne’re do well employees. They fail to train them in true customer service to include the fact that the customer is PAYING THEIR SALARY. There is obviously poor management from the top of the crap pile management to the toilet gate agents. Good riddance.
The plan all along if B6 were allowed to eliminate NK was to digest the company, then file bankruptcy. The “poor us” speech would have backtracked on all of their “promises”. That ‘merger’ was doomed to fail regardless. B6 is in trouble, as is NK. Together they just wanted to dump all of their debt – that was the plan. But this was clearly seen and blocked. Now both companies have to figure their way out of the mess they put themselves in. I don’t wish harm on either of them and hope they can find a way through this. But let’s get real – every major carrier (save for Southwest) has gone into bankruptcy at least once. Socialize the risk, privatize the profit…merikkan way…