Spirit Airlines files for bankruptcy as financial losses pile up and debt payments loom

Spirit Airlines said Monday that it has filed for bankruptcy protection and will attempt to reboot as it struggles to recover from the pandemic-caused swoon in travel and a failed attempt to sell the airline to JetBlue.

Spirit, the biggest US budget airline, has lost more than $2.5 billion since the start of 2020 and faces looming debt payments totalling more than $1 billion over the next year.

Spirit said it expects to operate as normal as it works its way through a prearranged Chapter 11 bankruptcy process and that customers can continue to book and fly without interruption. All tickets, credits and loyalty points remain valid, the airline said, as are affiliated credit cards and other membership perks.

Shares of Spirit Airlines Inc., based in Miramar, Florida, dropped 25% on Friday, after The Wall Street Journal reported that the airline was discussing terms of a possible bankruptcy filing with its bondholders. It was just the latest in a series of blows that have sent the stock crashing down by 97% since late 2018 — when Spirit was still making money.

Shares rose nearly 4% before the opening bell Monday.

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CEO Ted Christie confirmed in August that Spirit was talking to advisers of its bondholders about the upcoming debt maturities. He called the discussions a priority, and said the airline was trying to get the best deal it could as quickly as possible.

“The chatter in the market about Spirit is notable, but we are not distracted,” he told investors during an earnings call. “We are focused on refinancing our debt, improving our overall liquidity position, deploying our new reimagined product into the market, and growing our loyalty programmes.”

US airline bankruptcies were common in the 1990s and 2000s, as airlines struggled with fierce competition, high labour costs and sudden spikes in the price of jet fuel. PanAm, TWA, Northwest, Continental, United and Delta were swept up. Some liquidated, while others used favourable laws to renegotiate debts such as aircraft leases and keep flying.

The last bankruptcy by a major US carrier ended when American Airlines emerged from Chapter 11 protection and simultaneously merged with US Airways in December 2013.