Spirit Airlines Files for Bankruptcy Protection
In November, Spirit Airlines filed for Chapter 11 bankruptcy protection, marking the end of a tumultuous year for the budget airline. Despite being the iconic face of U.S. budget air travel, Spirit hasn’t had a profitable year since 2019, and has lost over $2 billion since 2020.
The airline’s financial woes began with the Covid-19 pandemic, which was devastating to the entire industry. However, that was only the start of Spirit’s problems. The airline has faced a host of challenges, including supply chain issues, rising costs, and a failed merger with JetBlue Airways.
One of the major factors contributing to Spirit’s struggles is the changing preferences of travelers. After the pandemic, many consumers have been willing to pay more for perks like extra space on board or access to airport lounges. This has put pressure on ultra-low-cost carriers like Spirit, which have seen increased competition from legacy carriers like American, Delta, and United.
Legacy carriers have introduced basic economy fares and segmented cabins to cater to a wider range of price points, from low fares to first-class tickets that can reach the mid-four digits. This has made it difficult for Spirit to compete, leading to mounting losses and looming debt payments.
In response, Spirit has taken drastic measures, including furloughing hundreds of pilots, offering salaried workers buyouts, and selling some of its Airbus fleet. The airline has also cut routes and filed for bankruptcy protection on November 18.
Despite the challenges, Spirit Airlines says it will continue to operate as normal while it works through the bankruptcy process, which it expects to exit in the first quarter of 2025. Analysts expect the airline to emerge from the process as a smaller airline with fewer routes.