Spirit Airlines FIles for Chapter 11 Bankruptcy

Source: Brandon Bell / Getty

After 40 plus years of continued service, Spirit Airlines filed for bankruptcy protection Monday. Mounting losses, unaffordable debt, increased competition for bargain-seeking airline passengers and the inability to merge with other airlines left the company little choice but to pivot from its initial process.

Since 1980, Spirit airlines have been known for its very low base fares. Its average domestic round-trip economy fare so far this year is $136, not including taxes and fees, according to data from Cirium, an aviation analytics firm. That’s 61% lower than the US industry’s average, and 69% less than the average on the four major US airlines — American, United, Delta and Southwest.

The airline has said that consumers who have any unfulfilled services with the company need not to worry, as the company will continue to operate as normal.

“Guests can continue to book and fly without interruption and can use all tickets, credits and loyalty points as normal,” it said in a statement.

According to CNN, Airlines and other companies in the United States frequently file for bankruptcy and emerge stronger on the other side of the process. Most major US airlines, including the three largest — American Airlines, United and Delta — have filed for bankruptcy at some point in the past 25 years.

Source: NurPhoto / Getty

Spirit’s statement said that creditors had agreed to pump an additional $300 million into the airline to fund its operations through the bankruptcy process. This could result in Spirit being able to emerge early next year with reduced debt and increased financial flexibility that will “position Spirit for long-term success”.

However, it is also possible that Spirit will end up being bought by another airline or be forced to liquidate. Numerous airlines, including American, have had their assets purchased out of bankruptcy and merged with a different airline. In recent years Spirit has attempted two mergers, one with fellow bargain carrier Frontier Airlines and once with JetBlue Airways.

As a result of the bankruptcy filing, Spirit expects to be delisted from the New York Stock Exchange “in the near term,” it said Monday, adding that its common stock is expected to be canceled and have no value as part of the restructuring.

Information from this story has sources from CNN Business and updated with additional reporting and context.

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