Spirit Airlines’ CEO said customers can still book tickets. Spirit has struggled since its failed acquisition by JetBlue Airways, a Pratt & Whitney engine recall and weaker-than-expected sales. The company is facing mounting losses and is defying a deadline to renegotiate $1.1 billion in debt payments scheduled for next year.
Spirit Airlines, the symbol of low-cost air travel that reshaped the industry, has filed for bankruptcy protection after years of mounting losses, failed mergers and tougher consumer tastes.
The company announced early Monday that it had reached a pre-arrangement with bondholders that included a $300 million loan to the debtor. Vendors and aircraft lessors will not be impaired.
The airline said it expects to continue operating as normal and customers can continue to make reservations. The company said it expects to emerge from bankruptcy protection in the first quarter of next year.
“The most important thing to know is that you can continue to book and fly now and in the future,” Spirit CEO Ted Christie said in a letter to customers Monday. That’s what I mean.” He said customers can use their tickets, credits and loyalty points “as usual.”
The Dania Beach, Fla.-based airline has struggled with an engine recall that grounded dozens of jets, rising costs after the pandemic and a failed takeover bid by JetBlue Airways that was blocked by a federal judge earlier this year. I was able to do it. For antitrust law reasons. The company’s stock price has fallen more than 90% since the beginning of the year.
Spirit is the first major U.S. airline to file for Chapter 11 since American Airlines 13 years ago.
The company has repeatedly pushed back deadlines with credit card processors to renegotiate $1.1 billion in debt due next year or risk losing the ability to process those transactions.
Spirit last week said it had to postpone its quarterly results and was in talks with most creditors to come up with an arrangement that would not impact customers, vendors, suppliers or others, but that it would not be possible to do so without “compensating for the company’s financial statements.” This will lead to the cancellation of the Existing capital. ”
Spirit said in a filing that it expects third-quarter profit margins to be 12 percentage points lower than a year ago and revenue to be $61 million lower than a year ago, despite soaring costs and falling freight rates. said.
The company hasn’t made a profit since 2019, with losses of more than $335 million in the first half.
In an effort to make up the difference, the company has sold dozens of jets to shore up cash, which has worked to its advantage this year due to a shortage of planes. Most recently, it sold 23 Airbus aircraft to GA Telesis, generating $519 million. Spirit said it expects to end the year with approximately $1 billion in liquidity.
The company furloughed about 200 pilots in September as it cut routes, and plans to furlough another 330 pilots in January. But analysts predict that if the airline goes bankrupt, it will have to further scale back operations to keep costs down.
spiritual path
Spirit’s business model, which offers the lowest fares and charges for everything from seat assignments to carry-on bags, has been successful with bargain-seeking customers and has allowed it to expand for more than a decade.
That bare-bones service became a popular punchline for stand-up comics. A greeting card depicting one of the company’s yellow planes even says, “I’m flying Spirit Airlines for you.”
The low fares and surcharge model has inspired similar offerings from major airlines such as Delta Air Lines, American Airlines, and United Airlines, which have rolled out basic economy fares.
But Spirit struggled after the pandemic, as costs rose across the industry and bookings for international travel outside of Spirit’s network surged as travel restrictions were lifted. Freight rates have fallen in the oversupplied U.S. market.
This summer, Spirit began offering bundled fares that include seat selection and other perks, as well as discounts on flights, as many travelers choose to pay more for larger seats onboard. It also offered a type of “first class” that included large seats in the front.
In January, a federal judge blocked JetBlue’s plan to buy Spirit for $3.8 billion. Spirit had a deal to merge with fellow low-cost airline Frontier before JetBlue rushed to acquire it in April 2022. Spirit shareholders supported JetBlue’s all-cash offer.
Judge William Young, appointed by former President Ronald Reagan, said the partnership with JetBlue would raise fares and reduce competition. Airlines had argued that this would improve their competitiveness, especially in the United States, where four airlines control about three-quarters of the market.
“Spirit is a small airline, but there are people who love it,” Young wrote in his ruling. “Dear Spirit customers, this is for you.”
Some analysts expect Frontier and Spirit to resume talks in the coming months.
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