Spirit Airlines, one of the biggest U.S. budget airlines, has placed a bankruptcy petition. Since 2020 this popular airline has lost more than $2.5 billion and is facing depth to be paid more than $1 billion in 2025 and 2026. CEO Ted Christie has confirmed that customers can book the tickets normally as the services will continue like before and the employers and vendors will get paid like earlier.
Airlines confirm that they are getting an investment of $350 million from their pre-existing bondholders, and will make $795 million of debt into stock. The bondholders have also extended their hands of $300 million as a loan in order to help your line to get over from bankruptcy. The downfall of Spirit started from the COVID pandemic and the field to return in a profitable business from that time. However, there are many various reasons behind this bankruptcy as well.
Also read: Spirit Airlines Bankruptcy: What Led to Chapter 11 & What It Means for Travelers
Restructuring details of Spirit
As per sources, $1.3 billion of the liquidity debt of the airline is divided into 3 parts. The equity investment of $350 million was made from the existing bondholders. Spirit Airlines has converted $795 million funded debt into equity. The bondholders waived their right off $300 million. As per the financial reports for the quarter ending 2 of 2024, the airline has reported operational cash and cash equivalents amounting to $845.3 million with a net worth of $809.6 million. The airlines have assured that they will maintain the operational cash flow throughout the process of financial restructuring.
Low-cost service offerings
CEO of United Airlines Scott Kirby has stated that low-cost offerings are unsustainable also the CCO Andrew Nocella affirmed that nearly 10% of the domestic capacity is “Severely unprofitable.”Instead of the challenges faced by the overall industry Spirit Airlines continues to provide services like “Go comfy” “Go Big” etc to attract consumers.
The operational challenges
Because of the grounding of Airbus and A321neo aircraft by Pratt & Whitney Pw1100G engines the Spirit faced a lot of challenges and its operations were disrupted. $93.9 was provided by Pratt & Whitney to Spirit Airlines as 12.5% of the Airline’s fleet was grounded. $200 million of additional agreement was made with international Aero Engines(IAE) to improve the carrier’s liquidity.
Also read: Top 10 Best Airlines in the World 2024 | Luxury Travel Choices
Spirit vs. Others
Wild competitors like Frontier Airlines and Jetblue introduced the premium models to attract more premium customers but Spirit Airlines remained committed to its low-cost model and the reports of mergers between the speed and Frontier Airlines didn’t go well. The merger between Frontier Airlines and Spirit Airlines didn’t go well, but other airlines also filed for Chapter 11 bankruptcy in the US American Airlines as American Airlines financially restructured and evolved from the bankruptcy after merging with US Airways. We see internationally that the Avianca and Latam airlines also emerged from Chapter 11 Bankruptcy. So the time will state whether Spirit Airlines will be able to recover from the Chapter 11 bankruptcy as history recalls us about the same.
