Spirit Airlines Files for Bankruptcy Protection, Continues Flying

Spirit Airlines has filed for Chapter 11 bankruptcy protection, becoming the first major U.S. passenger carrier to do so since American Airlines in 2011. Despite the filing, the budget-travel icon reassured customers that it will continue to operate and fly, buying the airline time and protection to restructure its business and bring in much-needed revenue.

CEO Ted Christie addressed customers in a letter on Monday, reassuring them that they can continue booking flights and using loyalty points and credits as usual. Spirit said it has reached a prearranged deal with its bondholders for a “streamlined” Chapter 11 plan and expects to exit the process by the first quarter of 2025.

Spirit’s financial struggles have been ongoing since 2019, with the situation worsening after the pandemic, an engine recall that grounded dozens of jets, and a failed merger attempt with JetBlue Airways. The airline also faced challenges renegotiating $1.1 billion in debt payments due next year. With its credit card processor deadline fast approaching, Spirit decided to file for bankruptcy protection to gain time for restructuring.

Although the bankruptcy filing allows the airline to reorganize its business, it does not mean Spirit will stop operating. The company will likely continue its schedule as much as possible through the holiday season, a key revenue period, though additional cuts may follow.

Customers whose flights are canceled due to bankruptcy will be entitled to a refund under U.S. law. However, the Department of Transportation has cautioned that bankruptcy could temporarily limit Spirit’s ability to provide refunds, and customers may face difficulties in obtaining one. The agency suggests that in such cases, credit card companies might offer a refund under the Fair Credit Billing Act. Travel insurance might also cover some prepaid expenses.

Looking ahead, Spirit aims to emerge from Chapter 11 bankruptcy protection as a smaller, more cost-efficient carrier. There’s also the possibility that other airlines could acquire Spirit’s assets as part of the restructuring process. While Spirit had previously planned to merge with Frontier Airlines before JetBlue made a competing offer, the two budget carriers could revisit a merger in the future, especially under more favorable political conditions.

Sources: AirGuide Business airguide.info, bing.com, cnbc.com