Spirit Airlines Files for Chapter 11 Bankruptcy — Here’s Why
Budget air carrier Spirit Airlines filed for bankruptcy Monday, marking the largest U.S. passenger airline bankruptcy in over a decade. This announcement follows years of financial struggles and a blocked merger with JetBlue Airlines — a merger which could have provided the airline with the lifeline it needed.
The bankruptcy represents the airline’s struggle to maintain its once-successful business model. Spirit has become known for its low ticket prices and for charging customers extra for everything besides a seat. Passengers often muttered but generally overlooked these additional costs because their tickets were so cheap. This strategy helped Spirit become the fastest-growing airline in the United States.
However, the COVID-19 pandemic wreaked havoc on the airline’s finances. Spirit has lost over $2.2 billion since 2020, nearly wiping out all its profits since its start in 2006. The airline, which has not posted a profitable quarter since 2019, is now drowning in debt and has already deferred $1.1 billion in payments to next year. The downfall of Spirit Airlines serves as a reminder of how fast things can change in an incredibly tough industry. Spirit was left unable to keep up with larger competitors — such as Delta, United, American and Southwest — who continue to dominate the skies.
Sensing their economic onslaught, Spirit reached a merger agreement with JetBlue Airlines in early 2022. However, in January of this year, a federal judge blocked the merger, and the deal fell through. The Department of Justice argued that with the absence of Spirit and its low prices, other airlines could now drive up prices for consumers without worries of competition. Spirit’s CEO, Ted Christie, criticized the decision, saying, “It has become ever more clear to me that we exist in an uneven playing field.”
Spirit secured $300 million in financing to keep its operations running, with plans to emerge from bankruptcy in early 2025. It is still possible that the future of Spirit Airlines involves a merger with another airline. Earlier this year, Hawaiian Airlines and Alaska Air were allowed to merge, fueling speculation that a deal may get done once Spirit emerges from its bankruptcy.
As Spirit Airlines navigates the turbulence of bankruptcy, CEO Ted Christie has assured flyers that Spirit intends to keep flying through its bankruptcy proceedings. “Ticket sales as well as all other operations will continue as normal,” the company said in the statement coming just 10 days before an expected record number of travelers take to the skies over Thanksgiving. “The most important thing to know is that you can continue to book and fly now and in the future.”
Photo Caption: Spirit Airlines has filed for Chapter 11 bankruptcy.
Photo Credit: Unsplash
