Spirit considers filing for bankruptcy: WSJ

Spirit Airlines is considering filing for bankruptcy protection amid mounting financial losses following its failed merger with JetBlue, according to a report. reports from the Wall Street Journal.

The airline is in discussions with creditors about restructuring the company, the Journal reported, citing multiple unnamed sources familiar with the matter. Spirit has explored multiple options, including an out-of-court sale or transaction, as well as possibly filing for chapter 11. Agreeing with bondholders and other creditors on a restructuring could support for the airline’s bankruptcy case, which has been the focus of the most recent discussions.

Notably, nothing happened immediately. While the timing of a potential bankruptcy filing remains unclear, it is not imminent, according to the Journal’s sources.

The report states that the bankruptcy case will focus on restructuring the airline through a chapter 11 process, suggesting that liquidation — a possibility some industry analysts noted earlier this year now – not yet considered.

“We realize this sounds alarming and harsh, but the reality is that we I believe there are very few scenarios that would allow Spirit to restructure.”

When reached for comment on Thursday, a Spirit spokesperson pointed to comments made by CEO Ted Christie during the airline’s second-quarter earnings call in August.

“Before getting into the results, I want to note that we are engaged in productive conversations with bondholders’ advisers to address upcoming debt maturities. As those conversations are ongoing, we will not go into detail or take any questions.” on the subject or speculate on the potential outcome, it is a top priority and we are focused on ensuring the best outcome for the business as quickly as possible, while focusing on driving performance and rolling out new travel options and increasing visitor numbers. experience.”

Spirit has found itself unable to turn a profit since the pandemic began in 2020 and has been saddled with $3.3 billion in debt, some of which is due soon, including $1.1 billion in bonds.

US airlines have become increasingly more dependent on insurance premium revenue since the pandemic began, while traditional airlines have also learned to master the concept of “basic economics,” somewhat neutralizing the competitive advantage that super low-cost airlines like Spirit previously enjoyed.

Spirit was also hit particularly hard by problems with some of its Pratt & Whitney engines, which forced the airline to ground parts of its fleet throughout the past year.

The airline has tried to limit losses by scaling back its operations, as well as changing its fare product structure and introducing several levels of premium seating options.

Change route map: Spirit Airlines cuts 32 routes in latest network revamp

An acquisition appears to be the airline’s best path forward and may be the only option to avoid restructuring. During the month-long antitrust trial in Boston closed last DecemberSpirit CEO Ted Christie and others have testified that because of the changing market, Spirit cannot continue to operate in its current form as an ultra-low-cost carrier.

Meanwhile, JetBlue argues that by absorbing Spirit, it can double its size and compete more effectively with the big four US airlines – American Airlines, Delta Air Lines, Southwest Airlines and United Airlines – Together they control about 80% of US air travel. market.

The merger will see JetBlue acquire Spirit and absorb its assets under its own brand, was finally blocked.

However, during a call with investors in late February, Christie ruled out bankruptcy or dissolution.

“This false narrative has been pushed by many experts,” Christie said at the top of the airline’s fourth-quarter earnings call on Feb. 8, in which Spirit reported a loss of $184 million in the period. . “However, back in the real world, we focus on the facts.”

Christie added: “You can rest assured that the Spirit team is 100% clear and focused on the adjustments we are currently implementing and will continue to implement throughout 2024 to get us back on track. generating cash flow and profits”.