Spirit Airlines Bankruptcy: What’s Next For the Company?

Following months of consumer concerns, Spirit Airlines’ bankruptcy claims have been confirmed. The company, which has been facing monetary hardships for years, is hoping their concerted efforts will posture them to come back better and stronger by 2025. With that said, the announcement has left many anxious about the state of their approaching holiday travel plans. So, what will the Spirit Airlines bankruptcy look like for you? 

What Led to the Spirit Airlines Decision?  

Spirit Airlines is America’s largest budget airline service. Throughout the past years, they have faced numerous hardships that have left them in a tough financial spot. Notably, they experienced a sharp drop in consumer booking during the COVID-19 pandemic, a phenomena that was felt across the aviation industry. Following the alleviation of the pandemic, the airline failed to rebound to its pre-pandemic numbers. 

Experts cite that Spirit’s once-beloved business model is becoming less popular in the eyes of consumers. Spirit’s business plan centers around the idea of “no-frills” travel. Consumers booking flights expect a simple airfare ticket, with no extra bells and whistles like Wi-Fi or in-flight meals. For a long time, this reduced-cost travel appealed to the vast majority of travelers. 

Over time, more people expressed a desire for an elevated travel experience. Consumers began to ask for extra amenities to make their flight an experience of its own. Paired with the existing competition from larger amenity-based airlines, Spirit had a hard time keeping up with the competition. 

Ultimately, its unique business plan and financial hardships linked to the pandemic and increased competition are the main reasons that have led to the Spirit Airlines Bankruptcy. 

Since the start of 2020, the company has reported more than $2.5 billion in losses. This number is simply a drop in the bucket of the expected $1 billion they will owe in 2025-2026. 

Conditions of the Spirit Airlines Bankruptcy 

According to a press release from Spirit, the company has been in long conversations with bondholders regarding the specifics of their bankruptcy and future business plans. The airline has officially filed for a Chapter 11 bankruptcy petition. The company asserts that the petition will align them for a future “reboot” in business. The Spirit Airlines Bankruptcy process will allow them to restructure and perform agreed-upon debt payments to remain in business 

To help them in restructuring, they will receive $350 million in backstopped commitments and $300 million in debtor-in-possession financing from existing bondholders. ‘

To perform the herculean feat of escaping debt, Spirit also intends to engage in cost-cutting measures. According to the company, they have found at least 80 million dollars worth of cost-cutting actions they can take. Firstly, the company will likely make substantial position cuts to reduce its financial burden. At present, Spirit has not commented on what positions are likely to receive these cuts. Additionally, Spirit has arranged a deal to sell 23 airplanes to a company called GA Telesis. For their exchange, Spirit will receive around 519 million dollars in payment, a sum that marks great progress in their debt repayment.

If Spirit Airlines is unsuccessful in the bankruptcy process, it is presumed that it will be forced to liquidate or assimilate into another airline company. In the past, Spirit has attempted to merge with partner companies, although their efforts failed due to legal reasons. 

How Will the Spirit Airlines Bankruptcy Affect Customers? 

In response to the Spirit Airlines Bankruptcy, many frequent-fliers have been left with feelings of anxiety. Specifically, people are worried about their plans (especially important holiday trips) being canceled. 

The company has released a statement to ease customers’ worries. According to the company, customers should expect operations to continue as planned. Travelers can still go on pre-planned flights, book future trips, and redeem award points as normal. Specifically, Spirit has claimed that they don’t expect any short-term interruptions to affect consumers. 

Working toward the bankruptcy resolution, the company is confident that it can remain a low-cost option for fliers across the country. 

Summary

For most, the word “bankruptcy” can illicit fear and anxiety, especially when it pertains to something as important as air travel. Due to years of financial issues, Spirit Airlines has filed for bankruptcy. They hope that the decision will enable them to bounce back in the future with more ability to serve consumers. According to the company, consumers can still book flights, use tickets, and fly with Sprit as normal. 
With that said, experts who have chimed in on the issue argue that consumers should be weary in the coming months. Despite Spirit’s claims, there is a possibility that current and future flights can be delayed or canceled. This is especially true if the airline reduces their flight schedule to cut costs. Likewise, those who rely on low-cost airline options may want to keep track of the Spirit Airlines bankruptcy success. If Spirit is forced to liquidate or merge, pressure on larger airlines will decrease, which could result in overall higher airfare for fliers in the future.