Spirit Airlines Says It Could Run Out of Money Next Week

There’s hardly a day without Spirit Airlines in the news lately. Unfortunately, much of it is bad.

At a bankruptcy hearing today, Thursday, April 23, the airline says the money it has available to spend could run out next week.

Yes, the airline has other funds in its accounts, but those are restricted and aren’t available for operating flights. Now, the airline has asked a judge to give it access to restricted funds, assuming a bailout is coming soon.

That is far from a guaranteed reality, though. Here’s the latest update on the troubled airline and what it means for passengers.

Spirit Airlines Running Out of Money, Wants To Use Other Funds

At a bankruptcy hearing on April 23, Spirit Airlines told a judge it could run out of money by next week.

Right now, the carrier has 3 types of funds: accounts restricted for use on payroll and taxes, funds restricted to repaying creditors, and funds usable for operating costs. It’s that later amount that the carrier is worried about.

However, Spirit has about $240 million in the funds restricted to use for creditors, and the airlines wants access to those funds for continued operations.

“The cash actually available to Spirit to fund ongoing operations is not going to last for very much longer,” said Davis Polk, the airline’s lawyer. “So either new financing, either or both of new financing or access to almost $240 million of restricted cash, is absolutely essential. Round about, no later than the end of next week.”

Spirit believes a government bailout is coming, which would give the government a 90% stake in the carrier in exchange for a $500 million bailout. The carrier would use the creditor funds to keep operating, replenish that account from the bailout, and then use additional funds to keep itself afloat.

What Should Spirit Passengers Do?

If you have a flight booked with Spirit, having a plan B is a good idea.

Checking the terms of your credit card’s travel insurance or your own travel insurance is important, so you know if you’re entitled to anything if your flight gets canceled

Moreover, booking a backup flight can be useful. Make sure to book something you can change or cancel if needed — most flights booked with miles are refundable, which will give you the flexibility you need while keeping your expenses down.

Final Thoughts

During bankruptcy hearings on Thursday, April 23, Spirit Airlines said it wanted access to restricted funds in order to keep operating. Otherwise, its available cash could run out in a week.

The restricted funds idea, however, depends on a government bailout providing a cash injection. That’s far from a guarantee, and even then it won’t solve the airline’s financial problems — just help it limp along for a big longer.

Spirit has serious financial issues. Until those are resolved and it becomes profitable, there’s no promise that cash injections, wherever they come from, will ensure the airline’s survival.