Spirit Airlines Might Be Near Chapter 11 Bankruptcy

Spirit Airlines could be on the verge of bankruptcy. The budget airline is reportedly discussing the option with bondholders. While no Chapter 11 filing is certain, Sprit needs to do something to get out from under its crushing debt.

Spirit faces around $3.1 billion in debt, according to Investor’s Business Daily, with $1.1 billion in secured bonds due to mature in less than a year. The airline’s credit card processor is also requesting these bonds be refinanced or extended before the end of October.

On top of the debt, Spirit is also struggling to make a profit. For Q2 2024, the company lost $193 million, which was in addition to the $143 million decline for the first quarter of the year.

“Significant industry capacity increases together with ancillary pricing changes in the competitive environment have made it difficult to increase yields, resulting in disappointing revenue results for the second quarter of 2024,” said Spirit’s CEO Ted Christie in the company’s earnings release at the start of August.

Is Spirit Airlines in Trouble?

To make the debt and profit matters potentially worse, Spirit anticipates another revenue loss in the current quarter. In August, engine problems with A320neo jets forced the company to ground them until at least the end of 2024. Without the planes in service, Spirit had to cut capacity by 5% in September, adversely affecting its bottom line.

Another setback was Spirit’s failed attempt at a merger with JetBlue Airways. The deal, worth $3.8 billion, was axed after a federal judge ruled the combined company would potentially hurt consumers.

In April, Spirit announced some cost-cutting moves that included the furlough of 260 pilots. It also canceled the delivery of several new aircraft scheduled for 2025-2026. In a surprising move to boost revenue, the troubled airline also raised ticket prices this past summer.

While the possibility of bankruptcy is looming for Spirit, which led to a steep drop in shares on Friday in premarket trading, analysts believe the airline will successfully renegotiate with creditors to avoid filing. This scenario is a possibility, as Christie noted in June that bankruptcy is not on table and has an “encouraging” plan to move beyond these turbulent times.