Spirit Airlines has filed for Chapter 11 bankruptcy. The low-cost travel icon said it will continue to fly. Spirit Airlines will be given time and protection to rebuild so it can continue operating and bring in the cash it needs.
Spirit Airlines is the first major U.S. passenger airline to file for Chapter 11 bankruptcy protection since American Airlines 13 years ago.
But the cheap travel icon is not closed. The filing gives Spirit time and protection to rebuild so it can continue operating and bring in much-needed cash.
CEO Ted Christie sent a letter to customers on Monday reassuring them that they can continue to book flights and use loyalty points and credits as normal.
Here’s what travelers need to know:
Why did Spirit file for bankruptcy?
Spirit Airlines has been in the red since 2019, following a pandemic that raised industry costs, caused engine recalls to ground dozens of the company’s Airbus planes, and led to a federal judge blocking JetBlue Airways’ planned acquisition of Spirit. Financial situation deteriorated.
The company was struggling to renegotiate $1.1 billion in debt payments due next year. The year-end deadline under the credit card processing agreement was approaching.
Spirit announced Monday that it has reached pre-arranged agreements with a majority of its bondholders on a “streamlined” Chapter 11 bankruptcy protection plan. We plan to complete that process in the first quarter of 2025.
Has my flight departed yet?
Filing for Chapter 11 bankruptcy does not mean that an airline will cease operations. Rather, it gives airlines protection to restructure their operations, which often means shedding assets or parts of their operations.
“From a consumer perspective, you have to be careful when Spirit changes schedules, retires aircraft, or lays off pilots or flight attendants. It affects the traveling public. That’s the case,” Henry said. Mr. Harteveldt is the founder of Atmosphere Research Group, a travel consulting company.
Airlines are likely to maintain schedules as much as possible heading into the holiday season, when airlines generate a lot of revenue during the popular travel period, but additional cuts are likely not far off.
What rights do I have if Spirit cancels my flight?
Under U.S. rules, if an airline cancels a flight and does not rebook it, the airline’s customers are entitled to a cash refund. Spirit Airlines announced Monday that it plans to continue operating, with CEO Ted Christie seeking to reassure customers that their reservations will generate much-needed cash during the busy holiday season. did.
But the Department of Transportation has warned that bankruptcy protection could make refunds difficult.
According to the company’s website, “If an airline or ticket agent files for bankruptcy, the company may be temporarily prohibited from providing refunds or vouchers, for example to preserve assets.” .
The agency said credit cards may provide refunds under the Fair Credit Billing Act if the airline that filed for bankruptcy protection refuses to refund refunds for flight cancellations or significant changes.
However, even with a refund, purchasing a ticket to change to your original flight at the last minute can be more expensive due to high demand and lack of seats. Harteveldt recommends always purchasing airline tickets with a credit card. Using a credit card provides more protection against cancellation than using a debit card or cash. If concerned, travelers can also book a refundable ticket on another airline, but that can also be very expensive.
If your flight changes due to bankruptcy, your travel insurance may also cover upfront costs.
What happens next?
I don’t understand this yet. Spirit plans to emerge from Chapter 11 bankruptcy protection in the first quarter of next year. This process allows airlines to reinvent themselves as smaller, more cost-effective airlines. Other airlines short on aircraft could skim off some of Spirit’s assets.
Spirit had a deal to merge with fellow discount company Frontier before JetBlue swooped in with a rival bid. Frontier and Spirit could try to merge again, especially since some industry insiders believe the incoming Trump administration will be relatively friendly to striking a deal.
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