Spirit Airlines files for bankruptcy
Spirit Airlines said Monday it has filed for bankruptcy protection and will try to restart as it works to recover from the crisis. Pandemic-Leading the travel industry into trouble and trying, but failing, to sell itself to other airlines.
Spirit Airlines, the largest U.S. budget carrier, has lost more than $2.5 billion since the start of 2020 and faces debt repayments totaling more than $1 billion next year that the company is unlikely to repay.
The move was widely anticipated.
Spirit said it expects to operate normally under its “prearranged, streamlined” Chapter 11 bankruptcy proceedings and that customers can continue to book and fly without disruption.
The airline said the Chapter 11 process itself will not affect wages or benefits for Spirit employees.
Miramar, Florida-based Spirit stock Down 25% on Friday The airline is discussing the terms of a potential bankruptcy filing with its bondholders, The Wall Street Journal reported. It’s just the latest in a series of blows that have seen the company’s shares plunge 97% since late 2018, when Spirit was still making money.
Chief Executive Ted Christie confirmed in August that Spirit was discussing upcoming debt maturities with advisers to its bondholders. He called the discussions a priority and said airlines were working to get the best deal as quickly as possible.
“The chatter in the market about Spirit is compelling, but we are not distracted,” he told investors on an earnings call. “We are focused on refinancing our debt, improving our overall liquidity position, deploying our redesigned new products into the market and growing our loyalty program.”
People still fly Spirit Airlines. They just didn’t give as much.
In the first six months of this year, Spirit Airlines passenger flight volume increased by 2% compared with the same period last year. However, they paid 10% less per mile and fare revenue per mile fell nearly 20%, causing Spirit to post a loss.
This is not a new trend. Spirit Airlines failed to return to profitability when the coronavirus pandemic eased and travel rebounded.
What’s wrong with your mind?
There are several reasons behind the economic downturn.
Mental costs, especially labor costs, have risen. The largest U.S. airline has lured some of Spirit’s budget-conscious customers by offering its own brand of basic fares. Fare prices for U.S. leisure travel, Spirit’s core business, have also fallen due to the plethora of new flights.
The upper end of the air travel market has surged while Spirit’s traditional budget segment has stagnated. So this summer, Spirit decided to sell bundled fares that include larger seats, priority boarding, free baggage, internet and snacks and drinks. That’s a dramatic change from Spirit’s long-standing strategy of luring customers with low prices and forcing them to pay extra for items like carrying a carry-on bag or ordering a soda.
Aviation industry analyst Henry Harteveldt noted to CBS News that on the one hand, there are people “who are saying, ‘You know what? I’m in better financial shape than I thought, and I might have been able to upgrade to an airline room with extra flights or something like that and Spirit has missed that opportunity.
Harteveldt, on the other hand, noted that many Spirit customers “cannot afford to fly as much as they once did due to higher costs of daily living.”
Spirit Airlines plans to cut its flight schedule from October to December by nearly 20% compared with the same period last year, a highly unusual move that analysts say will help support ticket prices. But it helps competitors more than it lifts spirits. Analysts at Deutsche Bank and Raymond James said Frontier, JetBlue and Southwest would benefit the most because they overlap with Spirit on many routes.
Spirit Airlines has also been plagued by Pratt & Whitney engines requiring repairs, forcing the airline to ground dozens of Airbus planes. Spirit Airlines said the recall was due to the company furloughing pilots.
Spirit said in an October regulatory filing that it has identified approximately $80 million in cost-cutting measures that will begin early next year. cbs miami news. The Florida-based airline noted that these layoffs will be driven primarily by “a reduced workforce.” The airline also revealed that it had agreed to sell 23 aircraft to aviation services company GA Telesis for approximately $519 million.
The merger did not materialize
The fleet is relatively young, making Spirit an attractive acquisition target.
Frontier Airlines tried to merge with Spirit Airlines in 2022, but was outbid by JetBlue Airways. However, the Justice Department filed a lawsuit to block the $3.8 billion deal, saying it would drive up prices for Spirit customers who rely on low fares and A federal judge agreed in January. Two months later, JetBlue and Spirit Airlines abandoned their merger.
U.S. airline bankruptcies were common in the 1990s and 2000s, as airlines struggled with fierce competition, high labor costs and sudden spikes in jet fuel prices. Pan Am, TWA, Northwest, Continental, United and Delta are among those involved. Some companies went into liquidation, while others took advantage of favorable laws to renegotiate debts such as aircraft leases and continue flying.
The last major U.S. airline bankruptcy ended with American Airlines emerging from Chapter 11 and merging with US Airways in December 2013.
