Spirit Airlines, the no-frills airline, has filed for Chapter 11 bankruptcy protection after several years of financial losses and two failed merger attempts.
The company announced on Monday that it had entered into a restructuring support agreement that is expected to reduce the airline’s debt, “provide increased financial flexibility, position Spirit for long-term success and accelerate investments providing Guests with enhanced travel experiences and greater value.”
In an open letter to Spirit customers, the company said that it expects to complete the restructuring process in the first quarter of 2025 and “emerge even better positioned to deliver the best value in the sky. Other airlines that are operating successfully today have undertaken a similar process.”
During the restructuring process, the airline will continue to operate and customers can continue to use their tickets, credits, and loyalty perks as usual.
Spirit Airlines has reportedly lost more than $2.5 billion since early 2020, when COVID-19 pandemic restrictions caused a massive slowdown in the airline industry. Although the volume of air travel has seemingly recovered in recent years, Spirit has failed to recoup its losses for numerous reasons.
Other major U.S. airlines have begun offering their own versions of budget-friendly, no-frills flights, thus taking some of Spirit’s market share.
In addition, fares for leisure travel have dropped with an increase in new flights, with passengers paying 10% less per mile during the first six months of the year compared to the same period in 2023.
Spirit has cut the number of flights it offers in the third quarter by 20% compared to the same period last year to boost prices.
The no-frills travel model that Spirit is known for has fallen in popularity in recent years, with more travelers now choosing premium travel options. Recently, Spirit began offering upgraded option packages that include larger seats, free bags, snacks, drinks, and other perks to capture some of this market, per The Dallas Express.
Other expenses that have hit the airline included increasing labor costs and required engine repairs on its Airbus jets due to a recall.
In 2022, Frontier Airlines tried to merge with Spirit but was outbid by JetBlue. However, JetBlue’s attempted merger with Spirit Airlines ultimately failed when the Justice Department sued to block the deal because it would drive up consumer prices. The deal was dropped after a federal judge ruled in favor of the Justice Department, as reported in The Dallas Express.