Spirit Aviation Holdings Inc.has filed for bankruptcy for the second time in less than a year. The airline, which has been struggling with financial issues, submitted a Chapter 11 bankruptcy petition in New York on Friday. According to the filing, Spirit has assets and liabilities ranging from $1 billion to $10 billion.
The news caused a significant drop in the company’s shares, which fell by as much as 55% before trading was halted at 4:30 p. m. in New York. However, Spirit has assured its customers that the bankruptcy will not affect its operations or any existing tickets and loyalty programs.
In a statement, the airline explained that the Chapter 11 filing was a result of ongoing negotiations with its major lessors, secured noteholders, and other key stakeholders. Spirit also stated that it plans to take this opportunity to reduce operating costs, revamp its flight network, and optimize its fleet size.
This bankruptcy comes after an earlier attempt at restructuring, which resulted in a reduction of $795 million in debt and a capital injection from bondholders. The funds were used to improve the airline’s services and attract more customers with added perks. However, these efforts were not enough to overcome the financial challenges faced by Spirit.
The bankruptcy news also comes after reports that the airline was engaged in talks with rival Frontier Group Holdings Inc.about a potential merger. The chairman of Frontier, Bill Franke, has been pushing for a merger between the two low-cost carriers for years. The news of the potential merger caused a 19% increase in Frontier’s shares in after-hours trading.
Spirit first filed for bankruptcy in November of last year, seeking to restructure $1. 6 billion in debt. The airline had been struggling to compete with larger carriers offering cheaper basic economy fares. Additionally, Spirit faced challenges with engine defects and high labor costs under new contracts.
In 2022, Spirit was involved in a takeover battle between JetBlue Airways Corp. and Frontier. Ultimately, JetBlue agreed to acquire Spirit in a $3. 8 billion deal, but the merger was blocked by a federal judge in January 2024 due to antitrust concerns.
The airline’s ongoing financial struggles have been exacerbated by the sharp decline in air travel caused by the pandemic. The company warned investors in August that it might not survive without quick access to additional funds. And in September, Spirit announced that it had fully utilized a $275 million revolving line of credit, with a portion of the funds going towards paying off US Bank, which had threatened to cancel a contract for processing customer credit card payments if Spirit did not provide more cash as collateral.
Spirit’s previous bankruptcy filing was an attempt to restructure its debt and overcome financial challenges. However, the airline’s latest bankruptcy filing reflects its inability to overcome these issues, despite its efforts to improve its services and attract more customers.