Spirit Airlines Will File for Bankruptcy, Won’t Merge With Frontier

The largest ultra-low-cost carrier in the U.S., Spirit Airlines, will declare bankruptcy under Chapter 11 soon and will not merge with Frontier, according to the Wall Street Journal.

This comes after Spirit and Frontier entered talks to possibly revive their merger, which had been stalled in 2022. The Journal reported that those talks are now over.

However, filing for bankruptcy does not mean that Spirit would stop flying. A Chapter 11 filing for bankruptcy means the airline would restructure its business and negotiate new terms on its debts while continuing to operate. Spirit would eventually emerge from bankruptcy as a likely smaller company.

Here’s what we know about the future of Spirit Airlines.

No More Merger With Frontier

At the end of October, news broke that Spirit was in talks with rival Frontier to merge. The union would have created the fifth largest airline in the U.S. by passengers carried. The 2 had already been discussing a merger, which almost happened in 2022, when Spirit shareholders voted in favor of selling their company to Frontier for $2.9 billion.

That’s when JetBlue came on the scene with a rival bid to buy Spirit for 30% more. Shareholders preferred that offer, but the JetBlue merger collapsed earlier this year when a federal judge ruled it would be anti-competitive.

That left Spirit alone in the face of a severe financial crisis. The airline has not made a profit since 2020 and is facing daunting debt repayment deadlines. Spirit has until the end of the year to refinance $1.1 billion of bonds or risk the ability to process credit card transactions.

The Journal said the airline is now in talks with bondholders to restructure debt due in 2025 and 2026. An agreement would wipe out existing shareholders, Spirit said, but would not affect customers or employees. (Spirit shares are dropping 57% at the time of this writing, while Frontier’s are up 4%.)

What Happened to Spirit?

The ultra-low-cost airline sector in the U.S. hasn’t recovered from the pandemic; neither Spirit nor rival Frontier has made money in 4 years. The introduction of Basic Economy fares from legacy airlines has also hurt discount carriers by offering the same unbundled model: passengers pay for the seat, and everything else is extra.

Spirit has tried to position itself more upscale by eliminating change and cancellation fees, but hasn’t seen a positive effect from that yet. The airline said this week its operating profit margin in the third quarter of 2024 dropped 12 percentage points from the same period a year ago and revenue by $61 million.

The immediate response from Spirit has been to cut routes. However, the airline is also launching new routes in an effort to move its airplanes to where they can turn a profit.

Final Thoughts

With the reported collapse of merger talks with Frontier, Spirit Airlines is close to filing for bankruptcy protection. This will bring a restructuring of its business, with Spirit emerging from the bankruptcy as a likely smaller — and profitable — airline.

Spirit’s yellow airplanes are not going away as a result of this news, but some routes will be inevitably cut, so keep that in mind if booking Spirit flights in the future.

The airline, however, has offered refunds or reaccommodation on different Spirit flights in recent cases of route cancellations.