Spirit Airlines Has Filed for Bankruptcy but Will Keep Flying

The largest ultra-low-cost carrier in the U.S., Spirit Airlines, has declared bankruptcy under Chapter 11, but the airline will continue to operate as it restructures its business.

This comes after last week’s news that Spirit and rival Frontier broke off talks to possibly revive their merger, which had been stalled in 2022.

Like other U.S. airlines before it, Spirit will not stop flying while in bankruptcy.

A Chapter 11 filing for bankruptcy means the airline will negotiate with its creditors to obtain new terms on its debts and restructure its business in the process. It’s likely that Spirit would emerge from bankruptcy as a smaller company.

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

Spirit Is Going Bankrupt to Survive

The immediate effect of filing for bankruptcy protection is that Spirit will get money from its creditors that will enable it to keep flying. The airline said in a statement after it filed on Monday that its bondholders will pay $300 million in so-called “debtor in possession” financing.

People who have bought tickets for Spirit flights can expect to travel as usual, though.

“Guests can continue to book and fly without interruption and can use all tickets, credits and loyalty points as normal,” the statement said.

Spirit was running out of time to solve a financial crisis that threatened its existence. The airline has not made a profit since 2020 and was facing daunting debt repayment deadlines. Spirit had until the end of the year to refinance $1.1 billion of bonds or risk the ability to process credit card transactions.

Without the protection of Chapter 11, that alone could have forced Spirit to stop flying by year’s end.

Spirit said last week it is negotiating to restructure its debt coming due in 2025 and 2026. While bondholders are in talks to get a new repayment schedule, shareholders are going to get essentially wiped out.

Spirit said that the bankruptcy filing will cause its stock to be be delisted from the New York Stock Exchange “in the near term.” Its common stock is expected to be canceled and has already lost nearly all of its value.

No More Merger With Frontier

Spirit also could have survived by merging with Frontier, but that possibility ended last week.

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.

What Happened to Spirit?

The ultra-low-cost airline sector in the U.S. hasn’t recovered from the pandemic; just like Spirit, its main competitor Frontier has not 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 had tried to position itself more upscale by eliminating change and cancellation fees, but is still a lot cheaper than the legacy carriers. According to data from aviation analytics firm Cirium, quoted by CNN, Spirit’s average domestic round-trip fare in 2024 was $136, not including taxes and fees. That’s 61% lower than the US average.

Just before the bankruptcy, Spirit’s 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.

It is also expected to lay off staff in January, CNN said.

Final Thoughts

Spirit Airlines has officially filed for bankruptcy protection. This will bring a restructuring of its business, with Spirit emerging from bankruptcy as a likely smaller — and profitable — airline.

Spirit’s yellow airplanes will continue to fly while the company is in bankruptcy, but it’s likely that some routes will be cut, so keep that in mind when booking Spirit flights in the future.

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