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Spirit Airlines faces credit downgrade amid bankruptcy talks

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Spirit Airlines faces credit downgrade amid bankruptcy talks
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Fitch Ratings has downgraded Spirit Airlines' long-term credit rating from 'CCC' to 'CC,' indicating a probable near-term default. This development comes as the airline negotiates with creditors and explores options to improve its financial situation amid reports of potential bankruptcy.

Spirit Airlines, based in Dania Beach, Florida, has faced financial challenges despite strong travel demand. The airline reported losses in five of the last six quarters, raising concerns about its ability to meet upcoming debt obligations. Reuters reported that negotiations with a supermajority of noteholders "remained productive, advanced materially, and would resume in the near term."

Fitch expressed concerns about Spirit's future, stating that customers might choose other carriers due to bankruptcy fears, potentially worsening the company's cash flow issues. The agency noted Spirit's decision to sell 23 older Airbus aircraft and furlough 330 pilots in January 2025 as part of its efforts to manage finances.

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"The downgrade follows Spirit's announcement that negotiations with its noteholders had advanced and that an agreement, if reached, would be effectuated through a statutory restructuring," Fitch stated. "A near-term default now appears probable."

Fitch projects a cash outflow of approximately $600 million for Spirit in 2024 but expects this will be partly offset by asset sales and compensation from Pratt & Whitney for engine-related issues. Problems with Pratt & Whitney's RTX engines have led Spirit and other airlines to ground parts of their fleets during 2024 and 2025.

Other major credit rating agencies have also rated Spirit poorly. Standard & Poor's downgraded the airline to "CCC" in January 2024, while Moody's assigned it a "B2" rating in September 2023.

In contrast, Delta Air Lines received an upgrade from Fitch to BBB- in July 2024, which is considered investment grade. American Airlines holds a B+ rating from Fitch.

The U.S. government maintains a Fitch credit rating of AA+, just below the highest possible rating. Few countries hold an AAA rating; some like Russia have seen their ratings reduced to junk status.

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