Spirit Airlines files for bankruptcy
Spirit Airlines has filed for bankruptcy protection, citing rising losses, heavy debt, and increased competition in the budget travel market.
unbranded – Newsworthy
- Spirit Airlines filed for bankruptcy protection, but most flights should continue as scheduled for now.
- Passengers with existing Spirit reservations should watch for notifications about potential changes to their itineraries.
- The fate of Spirit’s planes depends on whether they are owned or leased, and whether the airline chooses to sell them during bankruptcy proceedings.
Spirit Airlines officially filed for bankruptcy protection Monday after the pioneer of no-frills travel in the U.S. struggled with a long run of quarterly losses, failed merger attempts and looming debt maturities.
Spirit’s troubles deepened after the collapse of its $3.8 billion planned merger with JetBlue Airways in January and the impact of RTX’s, Pratt & Whitney Geared Turbofan engines snag that grounded many of its aircraft.
The airline listed its estimated assets and liabilities in the range of $1 billion to $10 billion each, according to a court filing on Monday.
Spirit has entered into an agreement with its bondholders that is expected to reduce total debt and provide increased financial flexibility.
The airline, as part of the prearranged Chapter 11 bankruptcy protection, has received commitment for a $350 million equity investment from existing bondholders.
Existing bondholders will also provide $300 million in debtor-in-possession (DIP) financing, which, together with available cash, is expected to support the airline through the Chapter 11 process.
Spirit expects to be delisted from the New York Stock Exchange in the near term.
The carrier said it expects to continue its flight operations through the proceedings and customers can book and fly without interruption. Passengers shouldn’t worry too much about their travel plans or frequent flyer miles immediately.
“In the short term, it will be just smaller,” Robert W. Mann Jr., a former airline executive officer and current president of R. W. Mann and Co., an independent airline consultancy, told USA TODAY. “If you’ve already gotten notice of your flight canceled or had to be rebooked, you’ve already gotten that notice.”
Spirit previously announced pilot furloughs and capacity cuts to address ongoing financial issues, as well as well-documented engine problems that have grounded many Airbus A320s across airlines. Spirit exclusively flies planes in the A320 family so it has been heavily impacted by these faults and was already capping capacity as a result.
Here’s what passengers need to know as Spirit enters bankruptcy.
What happens to already booked flights?Â
Most, if not all, flights should operate as scheduled in the near term.
Mann said it’s especially unlikely for Thanksgiving travel to be affected, but it is possible that there could be schedule changes and cancellations later in the winter.
“It is quite possible that by the 45-day mark, which is kind of the end of the year, that we may have some other changes,” Mann said.
Travelers with existing Spirit reservations should look out for notifications about any changes to their itinerary from Spirit as their departure date approaches.
“Their best notice is going to be the notice they get from the carrier like time changes or rebooking or inability to rebook, cancellations. Then of course, they’re subject to the new (Department of Transportation) rules on how travelers should be handled, so understanding that is probably an important thing,” Mann said.
The Department of Transportation recently finalized guidelines that require airlines to provide passengers with a full refund if their flight is canceled or delayed more than three hours on a domestic itinerary or six hours on an international itinerary for any reason. Travelers are only eligible for the refunds if they choose not to travel on the delayed flight or on an alternative itinerary offered by the airline.
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Can I transfer my Spirit loyalty miles/points to another airline?
Generally, airline loyalty points or miles are not transferrable, but Mann said frequent flyer programs are valuable assets that often survive bankruptcies.
“That is an asset, at least from the standpoint of people who might acquire them. You’re acquiring a customer base as well,” he said. “That actually could be a source of funding going forward.”
It’s also possible that Spirit will emerge from bankruptcy through a merger. Many industry watchers anticipate the incoming Trump administration will be more friendly to airlines joining forces than the Biden administration was. Under Biden, a proposed merger between Spirit and JetBlue was struck down, and Frontier Airlines also recently backed out of a bid to combine with its yellow ultra-low cost rival, as first reported by The Wall Street Journal. These deals could be revived, or another potential buyer could step in in a different regulatory environment.
If Spirit merges with another airline, it’s likely that the frequent flyer program will be part of the package and combined with that of the other carrier.
Who keeps Spirit’s planes?
It depends.
Spirit already doesn’t own all of its planes. For the part of its fleet that’s leased, the lessor will retain possession and will be free to re-lease to Spirit or another airline, depending on what offers are on the table.
Planes that Spirit does own could be sold off to raise cash during its bankruptcy, but the airline may choose to sell other assets like gates and airport slots instead if its managers feel the planes are more likely to generate income by remaining in service.
Contributing: Reuters
Zach Wichter is a travel reporter for USA TODAY based in New York. You can reach him at zwichter@usatoday.com.