Spirit Airlines files for bankruptcy amid financial struggles

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Spirit Airlines files for bankruptcy amid financial struggles

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By Sky Industry News

Nov 19, 2024

Spirit Airlines has officially filed for bankruptcy, following a significant drop in its stock value last month. The airline cited several factors for this decision, including mounting losses, unaffordable debt, increased competition for budget-conscious passengers, and the inability to merge with other carriers.

Despite the bankruptcy filing, Spirit Airlines assured customers that operations would continue without interruption. "Guests can continue to book and fly without interruption and can use all tickets, credits, and loyalty points as normal," the airline stated.

The bankruptcy proceedings are expected to allow Spirit to restructure its debt. The company plans to emerge from bankruptcy early next year with reduced debt and greater financial flexibility. Creditors have pledged $300 million in funding to support Spirit's operations during this period.

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According to CNN, Spirit employs nearly 13,000 full-time and part-time workers along with 8,000 independent contractors and temporary staff. The U.S. Treasury Department is listed as Spirit’s second-largest creditor due to an unsecured loan of $136 million provided through a federal program initiated during the pandemic.

The Wall Street Journal reported that discussions about Chapter 11 bankruptcy began in October, which caused a sharp decline in Spirit’s stock price by nearly 40%. Since then, Spirit’s shares have lost more than 86% of their value since the beginning of the year.

Financial challenges have plagued Spirit Airlines for years. The company has not recorded an annual profit since before the COVID-19 pandemic began. Earlier this year, a proposed merger with JetBlue was blocked by the U.S. Department of Justice (DOJ), which argued it would reduce consumer choice and increase ticket prices. This decision was upheld by a federal judge in January.

Without the merger with JetBlue, Spirit's financial situation worsened due to its $3.3 billion debt load, including $1.1 billion in secured bonds due within the next year. This led Spirit into negotiations with bondholders regarding Chapter 11 bankruptcy support.