Spirit Airlines, known for its budget-friendly fares, has filed for bankruptcy protection, which is signaling a major shift in the airline industry. Spirit made the announcement on Nov. 18, revealing they had been struggling with significant financial losses. Despite this setback, Spirit assured passengers that flights will continue, and travelers can still book tickets and use their existing loyalty points, credits and frequent-flyer miles.
According to the New York Times, Spirit filed for Chapter 11 bankruptcy, a process that allows companies to restructure their debt while continuing operations. This move gives the airline a chance to reduce its total debt, which was approximately $9 billion by the end of September, according to court documents. The airline also reported having between 25,000 and 50,000 creditors that they could not pay back.
The airline’s financial troubles are a result of engine problems, competition from other airlines and the after-effects of the COVID-19 pandemic. Earlier this year, Spirit’s proposed merger with JetBlue Airlines was blocked by the U.S District Court Judge William G. Young. The Department of Justice argued that the merger would harm consumers by reducing competition and creating a monopoly in the airline industry. The Justice Department expressed concerns that allowing the merger would also eliminate Spirit’s famously low-cost airfare, while the larger competitors would raise their prices. American Airlines, Delta AirLines, Southwest Airlines and United Airlines are the top largest airlines in the world and already control about two-thirds of the market. The merger would have boosted JetBlue’s market share to 10%.
The airline’s financial difficulties were made worse because it failed to renegotiate its debt. Furthermore, Spirit struggled to capitalize on the post-pandemic recovery in air travel. Increased competition from other airlines, particularly larger carriers, and ongoing operational challenges have kept Spirit from regaining a solid financial footing. The recent setback in its merger attempt with JetBlue added to its struggles.
Despite the bankruptcy, Spirit is not giving up on its future. The airline could potentially pursue another merger attempt in the future, especially with the new presidential administration that could lead to shifts in antitrust enforcement. For now, Spirit Airlines will continue its operations and work toward financial recovery, offering hope to travelers that the budget airline will remain a key player in the industry.
