Spirit Airlines files for Chapter 11; services continue amid financial overhaul

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Spirit Airlines files for Chapter 11; services continue amid financial overhaul

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Airbus A380 | Airbus

By Sky Industry News

Nov 18, 2024

Spirit Airlines has filed for Chapter 11 bankruptcy, as announced on November 18, 2024. The airline assured passengers that services would continue during the restructuring process, which is expected to conclude in the first quarter of 2025.

The bankruptcy filing is part of prearranged proceedings to implement agreed-upon deleveraging and recapitalization transactions. A restructuring support agreement with a "supermajority" of the airline's loyalty and convertible bondholders aims to improve liquidity by over $1.3 billion. This includes commitments for a $350 million equity investment from existing bondholders, equitizing $795 million of funded debt, and a $300 million debtor-in-possession financing agreement.

Ted Christie, Spirit Airlines' president and CEO, described the agreement as "a strong vote of confidence in the airline and its long-term plan." He added that these transactions will strengthen Spirit's balance sheet while continuing strategic initiatives to enhance guest experience.

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Due to Chapter 11 proceedings, Spirit expects delisting from the New York Stock Exchange (NYSE), though shares will continue trading over-the-counter without value in restructuring. The airline’s shares have lost significant value this year but saw a slight increase during pre-market trading after the announcement.

The last major U.S. airline undergoing similar restructuring was American Airlines in 2011, emerging from bankruptcy protection in December 2013 after merging with US Airways. Other international carriers like Aeromexico and LATAM Airlines have also successfully navigated Chapter 11 processes recently.

Spirit assured travelers operations would continue normally during restructuring, allowing it to invest further in travel experiences. Despite financial challenges and delays in quarterly reporting due to liquidity improvements efforts, Spirit remains committed to providing value through new travel options launched earlier this year.

In industry trends discussion, United Airlines executives noted challenges faced by low-cost carriers like Spirit due to unprofitable capacity and changing business models. However, Christie stated that their model is not obsolete but evolving with premium service offerings now available since August.

Grounding issues related to Pratt & Whitney engines have affected some of Spirit's fleet but are being addressed through agreements improving liquidity by up to $200 million this year.