DALLAS — Spirit Airlines (NK) has filed for Chapter 11 bankruptcy protection. Flights, ticket sales and other operations will continue as normal, the airline stated in an open letter to its customers on Monday, November 18, 2024.
The airline filed the "restructuring support agreement" (RSA) in U.S. Bankruptcy Court for the Southern District of New York, saying in an accompanying press release that it sought to restructure and reduce its debt. The move makes NK the first major U.S. airline to seek bankruptcy protection in 13 years.
CEO and President Ted Christie said in a statement that a very large majority of the company's bondholders had voted in favor of filing for bankruptcy, adding that the reorganization was a "vote of confidence" in NK and its long-term plans.
The Ultra Low-cost Carrier (ULCC) expects the process of restructuring to be over by the beginning of the second quarter of 2025.
The "no-frills" budget airlines cited mounting debt, operating costs, and competition despite strong travel demand. Its blocked $3.8 billion JetBlue (B6) merger and engine issues grounding planes worsened financial struggles.
The Florida-based airline announced last week that it had filed a Form 12b-25 with the SEC (Securities and Exchange Commission), informing them and investors that they wouldn’t be able to submit their quarterly report (Form 10-Q) for the period ending September 30, 2024, by the original deadline.
A few hours after the filing, the Wall Street Journal reported that NK was on the verge of filing for bankruptcy protection and that it was engaged in advanced discussions with bondholders to devise a bankruptcy plan that would garner support from a majority of its creditors.
After the Form 10-Q filing, shares in the airline saw their prices drop more than 60%.
Way before its failed merger with B6, NK had been losing money. Combine that with upcoming deadlines in its US$3.3 billion debt load, including more than US$1.1 billion in secured bonds maturing in less than a year, and you can see the carrier's predicament.
The ULLC also had a deadline from its credit card processor to refinance or extend those notes by October 21.
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Chapter 11 Bankruptcy Protection
Chapter 11 is widely recognized internationally, allowing foreign airlines with minimal U.S. ties to take advantage of its provisions. This provides a unified restructuring process across jurisdictions.
Using these tools, airlines can emerge from Chapter 11 with healthier balance sheets, optimized operations, and improved long-term viability. However, because the process is complex and costly, it is usually employed as a last resort after all other options have been exhausted.
"This set of transactions will materially strengthen our balance sheet and position Spirit for the future while we continue executing on our strategic initiatives to transform our Guest experience, providing new enhanced travel options, greater value and increased flexibility," he said.
The Federal Aviation Administration (FAA) said in a statement that its oversight of airlines includes assessing "significant changes in the operating environment, which could include financial distress... We have been continuously evaluating Spirit Airlines through our regular oversight process to ensure its resources, size, and organizational structure enable it to meet all operational requirements."
Spirit Airlines Data
Below is data about NK, according to data from aviation analytics company Cirium:
- Fleet: NK has 182 aircraft in service, with 32 in storage (for a total of 213 aircraft), with an average age of around 5.8 years old. It is an all-Airbus fleet, with the A320 as the backbone of the fleet, per below.
- Lessor: The ULLC owns 44 aircraft — about 20% of the total fleet, with 80% leased, per the Excel attached, with SMBC, Jackson Square, and AerCap the largest lessors.
- GTF: Of the aircraft Spirit operates, 93 aircraft in service today have GTF engines, with 24 in storage — ie. 117 of its 213 aircraft have such engines.
- Fares: The average roundtrip fare for NK was $140 not including taxes and fees and ancillary revenue, slightly higher than Frontier (F9)($136) and Allegiant (G4) ($134). The average stage length was 941 miles, compared to 905 miles for Allegiant and 862 miles for Frontier
Additional information about the Company's chapter 11 case, including access to Court filings and other documents related to the restructuring process, is available at https://dm.epiq11.com/SpiritGoForward.
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