Spirit Airlines files for second bankruptcy in under a year

Spirit Aviation Holdings Inc. filed for bankruptcy for the second time in less than a year after failing to turn around its cash-strapped airline.

The carrier filed Chapter 11 on Friday in New York, listing assets and liabilities of between $1 billion and $10 billion on a bankruptcy petition. The filing comes amid active negotiations with some of its largest lessors, secured noteholders and key stakeholders, the carrier said in a statement.

Shares of Spirit pared a drop of as much as 55% after normal market hours on Friday, falling 46% to $0.65 before trading was halted at 4:30 p.m. in New York. 

Spirit said in a letter to customers that the bankruptcy filing will not impact the airline’s operations and will have no impact on tickets or its loyalty program.

The airline also said it will “double down” on efforts in the second bankruptcy to reduce operating costs, redesign its flight network including reducing its presence in some markets and optimize is fleet size. The entered into a $2.9 million retention award agreement with chief executive officer Dave Davis following the announcement.

The bankruptcy marks the failure of an earlier restructuring that cut about $795 million in debt from Spirit’s balance sheet and required bondholders to inject additional capital into the business. The new funds were used to support initiatives to attract more fliers by diverting from its bare-bone fare model by offering customers more perks. 

The carrier’s filing comes a day after Bloomberg reported that Spirit engaged rival Frontier Group Holdings Inc. in high-level talks about the carrier’s ongoing efforts to chart a path forward. Frontier and Bill Franke, the Frontier chairman, have pushed for years for a combination of the two lower-cost carriers. Frontier rose 19% in postmarket trading to $5.84 as of 5:04 p.m. in New York.

Spirit emerged from bankruptcy protection in March, while the US airline industry was in the midst of a sharp decline in flying by consumers concerned with potential trade wars and rising inflation. 

The airline warned investors on Aug. 11 that it might not survive if it couldn’t raise cash quickly enough to satisfy creditors, and disclosed about a week later that it had fully tapped a $275 million revolving line of credit. 

At least $50 million of that went to US Bank, which had warned it would cancel a contract to process customer credit card payments at the end of the year if the airline didn’t set aside more cash as collateral. 

Spirit filed its earlier bankruptcy in November to restructure about $1.6 billion in debt after losing ground post-pandemic as larger airlines lured travelers away by offering more cheap basic economy fares. 

It was also hit by an engine manufacturing defect that grounded a portion of its aircraft fleet and by historically high labor costs under new contracts. 

The airline was bruised by a 2022 takeover battle between JetBlue Airways Corp. and Frontier. Spirit eventually agreed to be acquired by JetBlue in a $3.8 billion deal, but the combination was blocked in January 2024 by a federal judge on antitrust grounds. 

--With assistance from Andrew Mendez.

(Updates with retention agreement for CEO in fifth pargraph)

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