Spirit Airlines has reached a pivotal agreement with its secured creditors that puts the budget carrier on track to exit bankruptcy by early summer — emerging as a smaller, leaner operation with a sharply reduced debt load and a tighter flight network.
The agreement will provide Spirit with the financial support needed to finalize its restructuring and complete the remaining changes necessary to optimize the company’s fleet, network and cost structure. The airline says guests can continue to book flights and use tickets, credits and loyalty points as normal throughout the process.
A True Restructuring
Lawyers for Spirit told a bankruptcy judge Tuesday that the deal would allow the airline to exit Chapter 11 with a stronger balance sheet and reduced fleet size, according to the Wall Street Journal. Spirit CEO Dave Davis, who was selected for the position in April — a month after Spirit exited its first bankruptcy — told the Journal the stakes this time around are different.
“This is a true restructuring of the operations and profile of this business, when the first bankruptcy was not,” Davis said.
Spirit returned to bankruptcy court in August, less than a year after its first Chapter 11 reorganization failed to fix the structural problems at the heart of its no-frills business model. Under the new agreement, the airline is expected to shed more than $5 billion in debt and lease obligations — down from roughly $7.4 billion at the time of its August filing — with annual fleet costs cut by over 65% from pre-bankruptcy levels, the Journal reported.
“This agreement in principle is the result of months of hard work and allows Spirit to move toward completing its transformation,” Davis said in the company’s official announcement. “Spirit will emerge as a strong, leaner competitor that is positioned to profitably deliver the value American consumers expect at a price they want to pay.”
Fewer Flights, Fewer Routes — For Now
The restructuring has already reshaped what Spirit looks like on the ground. The carrier has been offloading planes, furloughing pilots and flight attendants, and pulling back from routes it was flying at a loss. Spirit has under 15,300 flights scheduled in March — down 29% from the same month last year, according to aviation data provider Cirium.
Davis told the Journal that ahead of last year’s bankruptcy, Spirit had taken on too many planes and was flying them to too many unprofitable markets, including West Coast destinations and hubs already crowded by larger competitors. Spirit is now exiting some of those cities, scaling back on low-demand leisure travel days like Tuesdays and Wednesdays, and removing certain West Coast routes altogether.
After this summer’s peak travel season, Spirit expects one final round of fleet reductions before it begins modestly adding planes in 2027, with a faster expansion planned for 2028.
Not Quite a Done Deal
The creditor agreement doesn’t guarantee a smooth exit. The plan still needs approval from the bankruptcy judge, and Spirit has yet to reach a separate agreement with the lenders behind its revolving credit facility, which is managed by Citibank.
Milbank attorney Andrew Harmeyer, representing Citibank, told the judge at Tuesday’s hearing, “There’s not an agreement as of yet, but we’re actively engaging with the company,” per the Journal.
Still, the mood among airline staff appeared cautiously optimistic. Unions representing Spirit’s pilots and flight attendants called the deal a step in the right direction.
“We can all breathe a sigh of relief,” the Association of Flight Attendants said in a statement.
The “new Spirit” is expected to be smaller, with more premium upsell options, including expanded first-class and premium economy offerings, layered on top of the low-cost model that built the brand.
Related Stories
Deal Alert: Spirit Offers 20% Off Base Fares From Atlanta
Spirit Airlines Unveils Top Searched Spring Break Destinations
Spirit Airlines Gets Top Marks for On-Time Performance
Spirit Airlines Reaches Key Deals in Bankruptcy Restructuring
Source link
