Spirit Airlines, whose approach to selling cheap tickets without amenities earned it fans and detractors, filed for bankruptcy protection on Monday after a string of setbacks, most recently a failure to renegotiate its looming debt.
The airline, whose last annual profit was in 2019, has had trouble finding its footing after a federal judge blocked a planned merger with JetBlue Airways in January. Spirit has also struggled to capitalize on the recovery from the pandemic because of intense competition, engine problems that have grounded some of its planes, and other factors.
The company filed for Chapter 11 bankruptcy protection in New York. It also announced an agreement with bondholders to restructure its debts and raise money to help it operate during the bankruptcy process, which it expected to exit in the first quarter of next year.
The company published an open letter to customers noting that fliers could “use all tickets, credits and loyalty points as normal.”
Spirit began operations as a trucking company operating under a different name in 1964. It later became a tour operator and started offering flights in 1990. Two years later, it became Spirit Airlines.
But the modern incarnation of the company traces its roots to 2006, when Indigo Partners, a private equity fund that has invested in low-cost airlines worldwide, acquired a majority stake in Spirit. Under Indigo and the leadership of Ben Baldanza — who spent a decade as Spirit’s chief executive and died this month — the airline sharply focused on lowering costs and selling cheap, bare-bones tickets.
Spirit’s business model made the airline the butt of late-night jokes, but also helped to reshape the industry. Travelers flocked to Spirit for its low fares, often overlooking concerns about the quality of its service. The airline earned consistent profits and other companies sought to emulate its approach. Today, most U.S. airlines offer some version of a no-frills ticket.
Spirit also became a powerful force in the industry. The airline’s presence in a city would often pressure others to lower fares. That phenomenon became a central part of the Justice Department’s successful lawsuit to prevent the JetBlue-Spirit merger, on the grounds that losing Spirit would harm consumers.
A round-trip flight on Spirit cost $140 on average, not including taxes, fees and add-ons, according to Cirium, an aviation data firm. That’s slightly higher than the $136 for Frontier Airlines and $134 for Allegiant Airlines, both rival budget carriers.
The bankruptcy filing comes after Spirit had spent months trying to renegotiate its debts, but it does not mean the airline will cease flying. Companies, including many airlines, often emerge from Chapter 11 bankruptcy cases, which are heard by federal judges, on stronger financial footing.
Airlines have filed for chapter 11 bankruptcy more than 180 times in recent decades, according to data from Airlines for America, a trade group. Three of the industry’s largest companies — American Airlines, Delta Air Lines and United Airlines — filed bankruptcy cases after the Sept. 11 terrorist attacks.
Those big airlines have profited from the pandemic recovery, in part by taking advantage of demand for premium and international travel. But Spirit and other budget airlines have had a more challenging time in recent years with rising costs and increased competition in large part because they did not fly to distant destinations or offer premium services like business class.
This summer was the busiest ever for air travel, according to Transportation Security Administration data. But low-fare carriers struggled to make the most of it because many of the popular destinations they serve were flooded with seats. The low-cost airlines have also faced rising competition from larger carriers that are selling “basic economy” tickets that are close in price to the fares offered by budget airlines.
“Our larger, higher-cost brethren have introduced products and services that mirror what we currently offer and in doing so have figured out ways over the last few years to more effectively compete for low-fare traffic,” Spirit’s chief executive, Ted Christie, told investors in August.
Some of Spirit’s problems are also out of its control. The airline flies about 200 Airbus A320 planes, but a defect with the Pratt & Whitney engines that power some of those aircraft means about one in 10 will not be flying this year. Spirit has said that it expects to start 2025 with 35 planes on the ground, rising to about 67.
The airline expects to receive $150 million to $200 million in compensation from Pratt & Whitney. To cut costs in recent months, Spirit had delayed delivery of new planes and furloughed pilots. It sold 23 planes last month and may sell more before emerging from bankruptcy, though about 80 percent of its planes are leased, according to Cirium.
Over the summer, Spirit tried to revive its fortunes by offering a premium services. In July, the airline announced that it would start selling four fare bundles, which include different perks. The top offering includes a seat with extra legroom, priority boarding, refreshments and waived fees on carry-on and checked bags. Another includes some of those perks and a guaranteed empty middle seat.
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