Spirit, the US airline known for its low fares and fee-based model, is reportedly on the brink of bankruptcy.
After failed merger talks with Frontier Airlines, the carrier is now preparing to file for bankruptcy protection, the Wall Street Journal reports, citing people close to the matter.
According to WSJ, sources said the airline is in advanced negotiations with stakeholders to shape a bankruptcy plan with majority creditor support. A filing is expected within weeks.
Spirit and Frontier have kept quiet on the report.
Florida-based Spirit has been struggling with mounting debt and rising costs for some time, making it difficult to compete in the increasingly competitive US airline industry. And despite cost-cutting measures, including selling planes and furloughing pilots, the carrier still faces significant financial challenges.
The latest development comes after JetBlue’s failed attempt to acquire Spirit earlier this year. In January, Federal antitrust regulators blocked JetBlue’s proposed US$3.8 billion (around AU$5.8 billion) acquisition of Spirit amid concerns the merger would adversely affect competition and access to low-price fares. The carriers dissolved their July 2022 merger agreement shortly thereafter.
According to CNN, Spirit’s shares plunged more than 50 per cent early Wednesday after the airline announced it could not file its Q3 2024 report by its deadline “without unreasonable effort or expense”.
The carrier remains in ongoing discussions with lenders to restructure debt and explore alternatives to boost liquidity, it said in a Securities and Exchange Commission filing.
The airline added that debt restructuring would not impact customers, staff or suppliers.
While ultra-low-cost carriers such as Spirit Airlines and Frontier struggle in the US, seeing profits plummet, full-service airlines are thriving. Read why legacy US carriers are winning against LCCs in our special report.
A recent Axios survey ranked Spirit as one of the least reputable companies in the US, lower than Meta, TikTok and the Fox Corporation.
Adversity in aviation
If it files for bankruptcy, Spirit Airlines would join a long list of carriers to go under in 2024, including Canada Jetlines, Air Malta, Armenia’s FlyArna, and Antigua and Barbuda’s LIAT.
Closer to home, Aussie low-cost carrier Bonza also folded this year, while Rex Airlines went into voluntary administration in July, grounding all jet operations. Another airline to operate in Australia, Air Vanuatu also went into voluntary administration in 2024.
But Spirit operates on an entirely different level to these carriers, with a fleet of more than 200 aircraft; to put that into perspective, Qantas uses around 125 planes. The US airline currently flies to ports across North America, Central America, South America and the Caribbean, but has recently cut dozens of routes in its network.