Spirit Airlines appears on the verge of joining the chapter 22 club, entering chapter 11 bankruptcy for a second time. The Wall Street Journal reports they’ve hired PJT Partners to help “explore strategic alternatives.”
- They previously filed bankruptcy in November 2024
- And exited in March 2025
- A speedy bankruptcy (contrast to the extraordinarily long 2002 – 2006 bankruptcy for United)
- But one that accomplished very little.
Earlier this Spirit AIrlines issued guidance that it might not survive a year as a going concern. It was not the first time they’ve made this warning.
The carrier exited bankruptcy having restructured debt but without restructuring much of its business. It’s been a money-losing operation since the pandemic, and continues to bleed cash. They raised new equity and raised revolving debt (that’s now been fully drawn) but that’s just kept them operating.
- The airline pulled down capacity (seat miles down 23.9% year-over-year at the end of the second quarter) but it’s very difficult to shrink an airline to profitability because fixed costs amortize over fewer seats.
- They furloughed 200 pilots and eliminated 200 other positions early in the year, and 270 additional pilots are scheduled for furlough November 1. 140 captains get downgraded October 1.
- And they moved away from a ‘bare fare’ with fees and into selling bundled fares, and rebranded the bundled fares in June – and began installing extra‑legroom seats while phasing out the sale of blocked middle seats.
This did not help. Second quarter revenue of $1.02 billion was down more than 20% year-or-year. Their net loss was $246 million for the quarter, with an operating margin of -18.1% (a substantial deterioration from the prior year’s second quarter -11.9%).
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.
They’ve used their remaining liquidity to keep credit card processing going. But they could still breach minimum liquidity covenants of their debt.
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 accumulating their miles – but I wasn’t doing that to begin with.
What would we do without Spirit Airlines, though? They’ve much improved their operation. They really aren’t a bad airline! And they help drive down prices across the industry. Plus they’re an endless source of entertainment.
It’s time to sell the furniture so they don’t have to burn it in a few months.
I think it is safe to say several percent of US airline capacity will be gone by the first of the year.
from the Wall Street Journal
The airline has said it is exploring ways to bring in cash such as selling planes, real estate or excess gate capacity.
@tim dunn – they said that two weeks ago in their filing and i reported it in the thread i linked in this post.
Here is what I wrote August 11:
“And so they’re looking at the sale of additional assets like planes, real estate and gates and “elimination of certain fixed costs.”
That line in the Journal is not what’s news or why the piece was written.
I didn’t copy the first line which is in line w/ what you wrote.
and you haven’t broken any news. You just, responsibly, monitor lots of sources. When other sites shut down their writing by this time of day, I commend you for keeping it going when late-breaking news like this comes along.
Airline stocks had a banner day but FLYY (Spirit’s new ticker) erased all of its gains after hours when this news came out. Other airline stocks will probably head up Monday as the prospect of several percent of capacity is likely to leave the US airline system by the first of the year.
I did not claim to break today’s news – the opening credited WSJ
I can read that, Gary.
No one peed in your cereal, Gary
Cue the Frontier merger talks. Even though Frontier should pass this time under the circumstances
Great pic, Gary (with the two police vehicles in the foreground) !!! Kind of emblematic of the whole Spirit Experience !
So many of us advised their shareholders to accept the merger offer by Frontier, as recommended by NK management. But shareholders got greedy instead trying to purse a B6 offer that was business-incompatible and anti-trust unwinnable.
Then Frontier gave them another offer during Spirit’s BK. The investors got greedy again and rejected… The current situation is the obvious end result.
no, Marco, NK’s execs had a fiduciary responsibility to take the best offer, which was at the time, the offer from B6 and superseded F9’s offer.
NK couldn’t have known that the DOJ would have shot down B6′ merger attempt.
B6 interfered w/ the intended NK-F9 merger and all 3 may now fail.
F9 is not in much better shape than NK and it is very likely that NK’s mgmt and creditors have approached potential acquirers including F9 and have gotten nowhere.
The NK fleet is owned by a couple of major financial organizations. A big chunk of that fleet is not functioning but NK, like F9, can’t find the places to use those planes even if they were operational.
the US hasn’t seen a belly up for an airline in quite some time. If the US hadn’t pumped so much money into the airline industry during covid, it might have been AA or UA – now it will be a string of smaller carriers.
the airline industry in the US has been massively mismanaged. The evidence is now coming into light.
Il Duce just invested billions into Intel and was a former airline operator. You think he doesn’t want to meddle in these high profile newsworthy situations? He lives for this.
The prior Spirit bankruptcy was during the straddle period between administrations and the creditors couldn’t get done what they wanted to get done without staying in BK and incurring outrageous fees. So they cleaned up the balance sheet and emerged in 3 months with BS projections and kicked the can down the road for a little while. Spirit will file when they decide to stop funding. Could be this year, or really whenever they choose that the moment is right to stop lighting short term money on fire.
B6 is playing footsie with UA but may emerge the big winner here with Spirit, with government support to boot.
The only story here for the time being is that they have now hired PJT instead of continuing to work with A&M. Palace intrigue but nothing has changed otherwise – operations continue to be unprofitable and they need a dance partner. And long term the creditors who will own this thing want to create the next Westjet to rival AC, not play for the bottom of the barrel with Frontier.
As sites like this remind us constantly the value play is in loyalty programs and credit cards not flying. With the right partner there is tons of room to create something big here over the next 5-10 years.
I’m with @Peter; I think our Dear Leader simply can’t resist the spectacle, and soon enough we, the taxpayers, will own a chunk of Spirit, like Intel… funny how it’s now right-wing populists cheering on nationalizing companies (thought that was kinda a lefty thing.) Bizarro world continues.