Spirit Airlines files for bankruptcy protection after mounting losses

Spirit AirlinesA low-cost airline icon that transformed the industry has filed for bankruptcy protection after years of mounting losses, a failed merger, increasing competition and more demanding consumer demands.

The carrier reached an agreed appointment early Monday act with its bondholders, including $300 million in debtor-in-possession financing to assist it through bankruptcy, which the corporate says it plans to exit in the primary quarter of next yr. Spirit said sellers and aircraft lessors wouldn’t be impacted. In a court filing, Spirit listed its assets and liabilities between $1 billion and $10 billion.

The airline said it expects this proceed operationsand CEO Ted Christie sought to reassure customers that they might still book, fly and redeem loyalty points with the airline.

“The most important thing you need to know is that you can continue to book and fly now and in the future,” Christie said in a letter to customers on Monday.

Spirit is the primary major U.S. airline to file for Chapter 11 since American Airlines 13 years ago.

The Dania Beach, Florida-based airline has struggled with an engine recall that grounded dozens of its jets, an increase in costs following the pandemic and the collapse of a planned takeover JetBlue Airwayswhich was blocked by a federal judge earlier this yr on antitrust grounds. Its shares have fallen greater than 90% this yr.

The airline had repeatedly pushed back a deadline with its bank card processor to renegotiate $1.1 billion in loyalty bonds due next yr or risk losing the power to process transactions.

On Monday it said it had reached an agreement with bondholders for $350 million in equity and that bondholders would exchange $795 million for equity. Spirit shares will likely be delisted from the New York Stock Exchange pursuant to its filing with the United States Bankruptcy Court for the Southern District of New York.

Last week, Spirit said it could must delay its quarterly filings and said it was in negotiations for a take care of nearly all of creditors that will haven’t any impact on customers, vendors, vendors and others but would wipe out the corporate's existing equity .

Spirit had said its third-quarter operating margins could be 12 percentage points below the negative 15% margin the corporate posted a yr ago as costs soared and fares fell. Sales fell $61 million.

The airline hasn't made a profit since 2019 and lost greater than $335 million in the primary half of the yr.

To make up the difference, the corporate sold dozens of jets to get monetary savings, which worked in its favor as planes are in brief supply this yr. Most recently, 23 Airbus aircraft were sold to GA Telesis to generate $519 million. Spirit has said it plans to finish the yr with roughly $1 billion in liquidity.

The company also plans to furlough one other 330 pilots in January, on top of about 200 in September, as routes were cut. However, analysts imagine that the airline could have to shrink further in bankruptcy to get costs under control.

Spirit's business model, offering every part from reserved seats to carry-on luggage at rock-bottom prices and costs, was a hit with bargain-hunting customers and enabled expansion over greater than a decade.

His unpretentious service became a preferred punchline for stand-up comics. A greeting Map A drawing of one in every of the airline's yellow planes even reads, “I would fly Spirit Airlines for you.”

The low fare and extra fee model led to similar offers from larger airlines akin to delta, American And Unitedwhich introduced basic economy fares.

However, Spirit struggled within the wake of the pandemic as costs rose across the industry and the lifting of travel restrictions sparked a surge in bookings for international travel outside of Spirit's network. Fares fell within the oversupplied US market.

Spirit this summer began offering bundled fares with seat assignments and other perks, in addition to a variety of “First Class” that included larger seats on the front of the plane, as many travelers opted to pay for roomier seats on board.

In January, a federal judge blocked JetBlue's planned $3.8 billion takeover of Spirit. At the start of 2022, Spirit entered right into a merger agreement with one other low-cost airline Border before JetBlue made a proposal in April of that yr. Spirit shareholders supported JetBlue's money offer.

Judge William Young, appointed by former President Ronald Reagan, said the JetBlue deal would drive up prices and reduce competition. Airlines had argued that this may help them higher compete, particularly within the United States, where 4 airlines control about three-quarters of the market.

“Spirit is a small airline. But there are those who love her,” Young wrote in his ruling. “To Spirit’s dedicated customers, this is for you.”

Some analysts expect Frontier and Spirit to resume talks in the approaching months.