Spirit Airlines (NK, Fort Lauderdale International) is exploring a potential Chapter 11 bankruptcy protection filing in the wake of a failed merger with JetBlue Airways (B6, New York JFK) and ongoing financial struggles, according to a report by the Wall Street Journal citing people familiar with the matter.
According to the newspaper, the budget carrier has been in discussions with bondholders about a restructuring agreement through an out-of-court transaction, but recent talks have been more focused on reaching a deal with bondholders and other creditors to support a Chapter 11 filing. No imminent timeline has been set. Chapter 11 allows airlines to restructure debts and renegotiate contracts while continuing operations.
ch-aviation has contacted the airline for comment.
In an August earnings call, President and CEO Ted Christie said the company was actively discussing strategies with bondholder advisers to address upcoming debt maturities. He emphasised the priority of these discussions but refrained from providing details or speculation on outcomes, highlighting the focus on swiftly achieving the best possible resolution.
Spirit is grappling with losses, declining revenues, and a significant debt load of USD3.3 billion, with over USD1.1 billion in secured bonds maturing within the year. The carrier also faces a deadline from its credit card processor to refinance or extend those notes by October 21.
The airline has already cut routes and plans to reduce capacity by nearly 20% in the fourth quarter of 2024 compared to the previous year. Additionally, it has faced operational challenges due to the recall of Pratt & Whitney engines, which has grounded parts of its fleet and last month saw 186 pilots being furloughed as the carrier cut costs.
In January, a federal judge agreed with the Justice Department when he blocked Spirit's proposed merger with JetBlue, ruling that it would reduce competition and harm consumers relying on Spirit's low fares. Consequently, both airlines abandoned the merger, citing insurmountable legal and regulatory challenges.
