Spirit Airlines bankruptcy: Budget airline files for bankruptcy after losing £2bn since 2020 and collapse of merger with JetBlue

Spirit Airlines said it has filed for bankruptcy protection and will attempt to reboot as it struggles to recover from the pandemic-caused high demand in travel and a failed attempt to sell the airline to JetBlue. Spirit is the biggest US budget airline - but it has lost more than 2.5 billion dollars (£2 billion) since the start of 2020 and faces looming debt payments totalling more than one billion dollars (£792 million) over the next year.

Spirit said it expects to operate as normal as it works its way through a pre-arranged Chapter 11 bankruptcy process and that customers can continue to book and fly without interruption. Shares in Spirit, based in Miramar, Florida, dropped 25% on Friday (15 November), after The Wall Street Journal reported that the airline was discussing terms of a possible bankruptcy filing with its bondholders.

It was just the latest in a series of blows that have sent the stock crashing down by 97% since late 2018 – when Spirit was still making money. Chief executive Ted Christie confirmed in August that Spirit was talking to advisers of its bondholders about the upcoming debt maturities.

He called the discussions a priority, and said the airline was trying to get the best deal it could as quickly as possible. People are still flying on Spirit Airlines, but they are not paying as much.

In the first six months of this year, Spirit passengers flew 2% more than they did in the same period last year. However, they are paying 10% less per mile, and revenue per mile from fares is down nearly 20%, contributing to Spirit’s red ink.

The biggest US airlines have snagged some of Spirit’s budget-conscious customers by offering their own brand of bare-bones tickets. And fares for US leisure travel – Spirit’s core business – have sagged because of a glut of new flights. The premium end of the air travel market has also surged while Spirit’s traditional no-frills end has stagnated.

So this summer, Spirit decided to sell bundled fares that include a bigger seat, priority boarding, free bags, internet service and snacks and drinks. In a highly unusual move, Spirit plans to cut its October-through-December schedule by nearly 20%, compared with the same period last year, which analysts say should help prop up fares. But that will help rivals more than it will boost Spirit.

Analysts from Deutsche Bank and Raymond James say that Frontier, JetBlue and Southwest would benefit the most because of their overlap with Spirit on many routes. Spirit has also been plagued by required repairs to Pratt & Whitney engines, which is forcing the airline to ground dozens of its Airbus jets.

Frontier Airlines tried to merge with Spirit in 2022 but was outbid by JetBlue. However, the Justice Department sued to block the 3.8 billion dollar (£3 billion) deal, saying it would drive up prices for Spirit customers who depend on low fares, and a federal judge agreed in January. JetBlue and Spirit dropped their merger two months later. The last bankruptcy by a major US carrier ended when American Airlines emerged from Chapter 11 protection and simultaneously merged with US Airways in December 2013.