A Spirit Airlines Airbus A320 taxis at Los Angeles International Airport after arriving from Boston on September 1, 2024 in Los Angeles, California.
Kevin Carter | Getty Images News | Getty Images
Spirit Airlines on Friday filed for bankruptcy protection for the second time in a yr, just months after the country’s largest budget carrier failed find to sturdy financial footing when it got here out of Chapter 11 protection in March.
Spirit debtholders agreed within the airline’s previous bankruptcy to exchange $795 million in debt for equity, however the carrier avoided greater changes to chop costs, like eliminating planes or more dramatically shrinking its footprint.
Spirit now says it’s going to reduce its network and shrink its fleet, cuts that it said will reduce costs by “lots of of thousands and thousands of dollars” a yr.
“Since emerging from our previous restructuring, which was targeted exclusively on reducing Spirit’s funded debt and raising equity capital, it has turn into clear that there may be far more work to be done and plenty of more tools can be found to best position Spirit for the long run,” Spirit CEO Dave Davis said in a news release on Friday.
In its filing, Spirit listed its assets and liabilities of between $1 billion and $10 billion.
The carrier sought to reassure customers that they will proceed to book and fly on Spirit after its bankruptcy filing.
“Virtually every major U.S. airline has used these tools to enhance their businesses and position them for long-term success,” Spirit posted on its Instagram account on Friday, written in white against a black background, uncharacteristic for the carrier that is usually featuring its bright-yellow planes and tropical beaches.
Dashed hopes
Spirit, known for its vibrant yellow planes, had expected to come back out stronger from its previous bankruptcy, which it entered in November and emerged from in March. However the airline was dragged down by continued high costs and weaker U.S. domestic travel demand.
In a court filing in December, Spirit had forecast a net profit of $252 million this yr. But earlier this month, it said it as a substitute lost nearly $257 million since March 13, after it exited Chapter 11, through the top of June.
Spirit warned just a few weeks ago that it won’t give you the chance to survive a yr unless it significantly increased its money. It also said its bank card processor was looking for additional collateral. It then borrowed the whole $275 million available under its revolving credit facility and said that the cardboard processor could hold back as much as $3 million a day from the airline.
Spirit’s shares are down 72% over the past month and down 45% in after-hours trading on Friday.
Labor cuts
Labor unions warned pilots and flight attendants earlier this month that more changes may very well be ahead. A whole lot of flight attendants are already on voluntary leave, and Spirit has planned to furlough lots of of pilots this yr to chop costs.
“This bankruptcy shall be harder and look different than last yr, but we’ll keep you closely informed and stick together as we move forward,” the Association of Flight Attendants-CWA told the carrier’s flight attendants on Friday after Spirit’s filing.
It said it expects more leaves shall be offered. “As we communicated just a few weeks ago, we urge you to take an honest take a look at your personal situation, examine all of your options, and prepare for all possible scenarios,” the union said.
Rivals circle
Spirit had struggled for years because it handled a glut of U.S. flights, a Pratt & Whitney engine recall and a failed takeover by JetBlue Airways, a deal that was blocked in court.
Spirit’s aircraft lessors had reached out to rival airlines in recent weeks to gauge executives’ interest in a few of the carrier’s planes, based on people acquainted with the matter, who spoke on the condition of anonymity since the talks were private. Spirit said Friday that it has been “actively engaged” with its biggest lessors, debtholders and others to “refine its path forward.”
The carrier is america’ largest budget airline, followed closely by rival Frontier Airlines, which has tried and did not merge with Spirit repeatedly since 2022.
Frontier on Tuesday announced 20 recent routes that compete with Spirit to win over its struggling competitor’s customers.
Spirit has been an icon of budget travel and its bare-bones service — and costs for luggage and the whole lot else — became a favourite punchline for comedians.
Through the years, larger airlines like American and United rolled out their very own basic fares for price-sensitive customers, but with more perks on board like snacks and large global networks where loyalty members could use their miles for more destinations.
One other challenge was that many travelers, especially post-pandemic, have sought out pricier and more spacious seats on board, in addition to more international travel. Spirit has tried to rebrand to bundle fares and supply more premium seating options, though competitors have still said they’ve a bonus partly because they’ve greater networks and more brand loyalty.
