Spirit Airlines warned last week that it may not survive the next year without securing additional cash. The budget carrier’s disclosure came just five months after it exited Chapter 11 bankruptcy protection, which has raised doubts about its recovery.
The Florida-based airline emerged from restructuring in March but has since faced a sharp drop in domestic demand and higher operating costs. Even some of the major US carriers have scaled back earlier growth expectations.
Experts Say Spirit Missed Hard Choices During Chapter 11 Restructuring
Photo: Robin Guess | Shutterstock
Spirit’s troubles have worsened since it left bankruptcy protection earlier this year. In a report filed last week, the airline disclosed that it has lost nearly $257 million since mid-March through the end of June, despite previously projecting a profit of $252 million for the year.
The carrier also warned that its credit card processor has demanded additional collateral, which, of course, has added pressure to its already strained finances. According to CNBC, industry experts note that the airline avoided making tougher restructuring moves during Chapter 11, such as renegotiating leases or shrinking its fleet. Instead, it reached a deal with bondholders, who exchanged debt for equity.
Bankruptcy attorney Brett Miller, US co-chair of the restructuring department at Willkie Farr & Gallagher, who represented the creditors’ committee, told the outlet the ultra-low-cost carrier “didn’t use the tools available to them in Chapter 11” for bigger changes. Joe Rohlena, airline analyst at Fitch Ratings, said that the airline “made it that much more unlikely for them to succeed without having tackled some of those issues,” and it might not be able to avoid bankruptcy again because of its cash burn.
Spirit’s Reset Has Been Tougher Than Expected
Photo: Angel DiBilio | Shutterstock
Signs of financial stress are becoming clearer. CNBC reported that some aircraft lessors have approached other airlines in recent weeks to see if they would take on parts of the carrier’s Airbus fleet. According to ch-aviation data, Spirit operates around 214 Airbus aircraft, and the fact that lessors are exploring backup options shows doubts over the airline’s stability. The carrier itself has said it is working to raise cash through the sale of planes, leases, and real estate.
It has also reduced some unprofitable routes and previously announced job cuts and aircraft sales in an effort to cut costs. Aviation analytics firm IBA’s chief economist, Stuart Hatcher, noted that the airline could have achieved far greater relief if it had used the bankruptcy process to lower its lease payments. He estimated that even a 10% reduction across all lease rates would have had a significant impact on Spirit’s cash flow.
Spirit Airlines Current Fleet
Aircraft
Fleet
Airbus A320-200
62
Airbus A320neo
91
Airbus A321-200
29
Airbus A321neo
32
Furthermore, Spirit’s problems were also compounded by setbacks long before its most recent filing. The grounding of several jets in 2023 due to a Pratt & Whitney engine recall reduced its flexibility, while repeated merger efforts with both Frontier and JetBlue ended without success. That left Spirit without a partner and still carrying significant financial strain.
Additionally, increasing labor costs after the pandemic made it even harder to sustain its ultra-low-cost model. These pressures have only intensified in the months since Spirit exited Chapter 11. Several airlines across the US have reported softening demand and reduced revenue expectations they set earlier this year.
Analysts note that Spirit may have counted on a smoother reset than was realistic. “I think there may have been a bit of optimism on their part in terms of kind of the strategic reset that they had planned. That then came face-to-face with a harder, harsher aviation environment,” Rohlena told CNBC.
Spirit’s Long-Term Future Still In Doubt
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Indeed, Spirit emerged from bankruptcy protection earlier than expected on the assumption that it could stabilize quickly, but the months since have shown otherwise. The recovery has been far more difficult than the carrier anticipated. Even so, some experts believe a complete shutdown is unlikely.
James Sprayregen, a veteran bankruptcy lawyer who worked on the restructurings of United Airlines and TWA, noted that airlines often receive support because their collapse would ripple through employees, customers, and the broader market.
IATA Code
NK
ICAO Code
NKS
Year Founded
1983
Spirit’s CEO Dave Davis has also sought to reassure staff. In a memo last week, he told employees that the changes underway will “continue to provide consumers the unmatched value that they have come to expect for many years to come.”
