Spirit Airlines announced the implementation of a financial restructuring agreement aimed at reducing its debt and «strengthening its long-term position as a low-cost airline.» The company initiated a prearranged Chapter 11 process in the United States Bankruptcy Court for the Southern District of New York to carry out this restructuring.
Spirit Airlines’ decision to file for Chapter 11 follows several failed merger attempts. In 2022, the airline attempted to merge with Frontier Airlines, but the proposal was rejected by shareholders. Subsequently, in 2023, a potential merger with JetBlue was announced; however, in January 2024, a federal judge blocked the acquisition, arguing that it would reduce competition in the sector. These failed mergers, combined with growing losses and imminent debt maturities, have led Spirit to seek Chapter 11 protection to restructure its finances and ensure its long-term viability.
According to the company, the agreement is supported by a supermajority of its loyalty and convertible bondholders (a «supermajority» typically requires between 70 and 90 percent of the total). As part of the measures, Spirit will receive a backstopped capital investment commitment of $350 million, along with debtor-in-possession (DIP) financing of $300 million, provided by the same bondholders. The airline expects this process to convert $795 million of funded debt into equity.
Operations Uninterrupted
Spirit assures that all its operations will continue to function normally during the restructuring process. This includes ticket sales, the accrual and use of loyalty points, and employee wages and benefits. Likewise, suppliers, aircraft lessors, and holders of secured debt will continue to receive payments as usual.
The company’s CEO, Ted Christie, stated he was «pleased that we have reached an agreement with a supermajority of our bondholders, which represents a vote of confidence in Spirit and our long-term plan. This set of transactions will materially strengthen our financial position as we continue advancing our strategic initiatives.»
Plans for the Future
Spirit has submitted a proposed Plan of Reorganization that includes the terms agreed upon in the restructuring agreement, subject to court approval. The company anticipates exiting the Chapter 11 process during the first quarter of 2025.
As part of this process, Spirit expects to be delisted from the New York Stock Exchange in the near term. Its common stock will continue to trade in the over-the-counter market, although the company expects these shares to lose their value as a result of the restructuring.
With these measures, Spirit Airlines aims to solidify its financial foundation while continuing to operate as one of the leading low-cost airlines in the U.S. market.
