Budget travel icon Spirit Airlines files for bankruptcy protection after mounting losses

KEY POINTS

* Spirit Airlines CEO said customers can continue to book tickets on the airline.

* Spirit has struggled since its failed acquisition by JetBlue Airways, a Pratt & Whitney engine recall and weaker-than-expected sales.

* The company has faced mounting losses and has been against a deadline to renegotiate $1.1 billion in debt payments due next year.

Spirit Airlines an icon of budget air travel that reshaped the industry, has filed for bankruptcy protection after years of mounting losses, a failed merger and more demanding consumer tastes.

The carrier early Monday said it reached a prearranged deal with its bondholders including $300 million in debtor-in-possession financing to help it through the bankruptcy, which it expects to exit in the first quarter of next year. It said vendors and aircraft lessors will not be impaired.

The airline said it expects to continue operating normally and said customers can continue to book as the busy holiday season approaches.

“The most important thing to know is that you can continue to book and fly now and in the future,” Spirit CEO Ted Christie said in a letter to customers on Monday. He said customers can use tickets, credits and loyalty points normally.

Spirit is the first major U.S. airline to file for Chapter 11 since American Airlines 13 years ago.

The Dania Beach, Florida-based airline had struggled with an engine recall that grounded dozens of its jets, a surge in costs after the pandemic, and the failure of its planned acquisition by JetBlue Airways, which was blocked by a federal judge earlier this year on antitrust grounds. Its shares fell more than 90% this year.

The airline had repeatedly pushed back a deadline with its credit card processor to renegotiate a $1.1 billion debt due next year or risk losing the ability to process those transactions.

It said Monday that it had reached a deal with bondholders for $350 million in equity and that it “will complete a deleveraging transaction to equitize $795 million of funded debt.”

Spirit filed for protection in U.S. Bankruptcy Court of the Southern District of New York. Spirit will be delisted from the New York Stock Exchange as a result of the filing, the company said.

Last week, Spirit said it had to delay its quarterly filing and said it was in discussions for a deal with a majority of creditors that would not affect customers, vendors, suppliers and others, but that it would wipe out the company’s existing equity.

Spirit said in the filing that it expects its third-quarter margins to be 12 percentage points lower than during the same period a year ago and that sales were $61 million lower than last year, while costs surged and fares slipped.

The airline hasn’t had a profit since 2019 and lost more than $335 million in the first half of the year.

To try to make up the difference, it has sold dozens of jets to shore up cash, which has worked in its favor since planes are in short supply this year. Most recently, it sold 23 Airbus aircraft to GA Telesis to generate $519 million. Spirit has said it expects to end the year with approximately $1 billion in liquidity.

The company also plans to furlough another 330 pilots in January on top of about 200 in September as it slashed routes. But analysts expect the carrier will have to shrink further in bankruptcy to get a handle on costs.