Budget Airline Files for Bankruptcy as Low-Cost Model Falters

Spirit Airlines announced on Monday that it has filed for bankruptcy protection, Reuters reported. The move comes as the budget airline has struggled with mounting debts, a succession of quarterly losses, and a string of scrapped merger attempts.

Spirit plans to continue business as it deals with the Chapter 11 proceedings, which will not affect the wages or benefits of the airline’s employees. Customers can continue to book itineraries with the airline for the foreseeable future. The company expects to exit the bankruptcy process at some point during 2025’s first quarter; it has arranged a deal with bondholders which allows the airline to raise money to continue operation and restructure its debts during the process. Spirit has furloughed hundreds of its pilots and is selling some of its aircraft to gain liquidity.

Despite strong traveler demand, Spirit lost roughly $360 million in the first half of 2024 and hasn’t posted a full year’s profit since 2019. The airline has been struggling since it’s mooted $3.8 billion merger with JetBlue, which industry experts say would have provided Spirit with a significant financial boost. The airline has been forced to ground multiple aircrafts, which in turn raised operating costs, due to engine issues.

The airline said it was using the bankruptcy process to complete a "comprehensive balance sheet restructuring" to reduce its overall debt and, hopefully, set the company on a track for long-term success. Spirit’s stock shares have dropped more than 90 percent during 2024. On Monday, the company was removed from the New York Stock Exchange.

Back in June, rival airline United's CEO Scott Kirby predicted the demise of Spirit and its fellow budget airline Frontier. "I think they're going out of business. It's a fundamentally flawed business model," Kirby said an episode of The Air Show podcast. "The customers hate it, the customers have voted, and they're going out of business."