Spirit Airlines on target for a $475 million bankruptcy lifeline

WHITE PLAINS, N.Y. — Spirit Airlines is making “massive progress” to revitalize the airline, the carrier’s restructuring lawyer Marshall Huebner said in a court hearing Tuesday.

The struggling budget airline has reached an agreement with a few of its debtholders for as much as $475 million in debtor-in-possession financing, a lifeline that bankrupt corporations can use to proceed operating, in addition to $150 million from a significant aircraft lessor, Huebner said. The agreements are subject to court approval.

Spirit last month filed for its second Chapter 11 bankruptcy protection in lower than a 12 months after high costs, weaker demand and a bunch of other lingering problems drove greater than $250 million in losses from when it emerged from its first bankruptcy in March through June.

The carrier has been racing to slash costs and recently announced plans to chop 40 routes and furlough about one-third of its flight attendants. The airline is in talks with its pilots’ union and is in search of about $100 million in cuts from that group. Last month, Spirit said it was drawing down everything of the $275 million in its revolver.

Huebner, a partner at Davis Polk & Wardwell, said in U.S. Bankruptcy Court on Tuesday that people who find themselves pessimistic concerning the struggling carrier’s turnaround prospects should “say less” and observe what it’s doing.

Spirit said on Tuesday that it now has immediate access to $120 million in liquidity after a motion was granted to make use of money collateral.

Spirit is planning to reject leases on 27 Airbus narrow-body aircraft from Ireland-based leasing giant AerCap, 25 of them airplanes which are grounded or shall be grounded for inspection because of a Pratt & Whitney engine defect, Huebner said in court. AerCap can pay Spirit $150 million as a part of the agreement, under which Spirit would still plan to take delivery of 30 more airplanes, the corporate said.

AerCap didn’t immediately comment on the plan.

Spirit said additionally it is planning to reject 12 airport leases and 19 ground handling agreements because the carrier shrinks to chop costs, a plan the court approved.

One other hearing is scheduled for Oct. 10. If the debtor-in-possession financing is approved, $200 million can be available immediately.

“These are significant steps forward in a brief time frame to construct a stronger Spirit and secure a future with high-value travel options for American consumers,” Spirit CEO Dave Davis said in a news release later Tuesday. “While there’s more work to be done, we’re grateful to our stakeholders who’ve stepped as much as support us throughout the restructuring.”

Senior secured noteholders at Spirit include Citadel Americas, Ares Management, AllianceBernstein, Arena Capital Advisors and Pacific Investment Management Company, based on a court filing.

Spirit’s competitors United Airlines, Frontier Airlines, JetBlue Airways and Allegiant Airlines have announced latest routes in hopes of capturing Spirit’s customers. United CEO Scott Kirby went a step further, saying earlier this month that he expects Spirit to exit of business.

Spirit has struggled for years with an engine recall, a failed acquisition by JetBlue, higher costs and a shift in consumer tastes for more upmarket offerings. The Dania Beach, Florida-based airline has altered its business technique to offer higher-end products in recent months.