SPIRIT Airlines chiefs have filed for bankruptcy after talks of a proposed merger collapsed.
Company bosses have issued a statement to travelers as they scramble to clear its debt.
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Rumors of a bankruptcy filing had been swirling for weeks, and these intensified when talks with fellow lost-cost airline Frontier broke down.
Spirit chiefs filed for bankruptcy in New York and expect to emerge from the process next year, per the New York Times.
Court papers revealed the company had debts of around $9billion.
Bosses have been scrambling to cut costs in recent months.
Pilots have been furloughed, and 23 jets were sold by the company last month.
Over 300 pilots will be furloughed on January 31 – months after 186 were let go.
More than 100 captains have also been downgraded to first officers.
Bosses expected around $500million would be brought into the company by selling off the planes.
Chiefs have blamed factors such as the pandemic and issues with Pratt & Whitney engines that power some of the company’s Airbus A320 jets.
The company has since issued a letter in a bid to reassure travelers.
Passengers can continue to use all tickets as normal, according to the letter seen by The U.S. Sun.
They can also continue to use the company’s loyalty program and perks.
The move to file for bankruptcy protection has been branded a “proactive” step by chiefs.
How does bankruptcy work?
Bankruptcy is a specific legal process that helps companies eliminate debt they can’t repay.
The process allows businesses to start fresh and gain access to new credit.
Supervised by federal courts, bankruptcies allow a company to sell off its assets more easily to pay off creditors, according to Investopedia.
Chapter 11, a common process for companies, is used to restructure a business with the goal of remaining open – even if it means selling off most of the company’s properties.
Chapter 7, on the other hand, sells all of a company’s assets, putting it out of business.
Chapter 15, alternatively, allows for collaboration between American and foreign courts to conduct bankruptcy proceedings with “parties of interest involving more than one country,” per the United States Courts.
They claimed it would help them provide financial flexibility and set Spirit up for long-term success.
“The most important thing to know is that you can continue to book and fly now and in the future,” the letter stressed.
Spirit execs were locked in talks with Frontier officials, but these negotiations have stalled.
The low-cost air carrier was on the verge of merging with JetBlue, but the deal was blocked earlier this year.
Judges were reportedly concerned about the impact of price hikes on consumers.
Joanna Geraghty, the CEO of JetBlue, had previously described talk of a merger as a “bold and courageous plan intended to shake up the industry status quo.”
Spirit is not the only airline that has filed for bankruptcy.
In 2011, American Airlines filed for bankruptcy before merging with US Airways two years later.
In 2007, Delta Airlines chiefs confirmed the company had exited bankruptcy after a 19-month process.
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