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.