US budget carrier Spirit Airlines has announced it has filed for bankruptcy protection after accumulating debt and losing more than $2.5bn since 2020
But it has stressed to its customers that it will still continue to fly.
The airline announced on Monday 18 November that it has entered into a “restructuring support agreement” that has been supported by a supermajority of its bondholders.
The filing follows two failed attempts to merge with other airlines, falling stocks and a loss of income due to lower revenues and higher expenses.
Spirit says the restructuring should reduce its debt, provide financial flexibility and position Spirit for “long-term success” by investing in passenger experience.
Spirit expects to continue operating business as usual while it navigates a prearranged, streamlined Chapter 11 process, which is a declaration of bankruptcy while it reorganises its company and seeks relief.
“Guests can continue to book and fly without interruption and can use all tickets, credits and loyalty points as normal,” the airline said.
They also added the Chapter 11 process itself will not impact employee or vendor wages or benefits.
The airline said it has received commitments for a $350m equity investment from existing bondholders and will complete a debt-reducing transaction to equitise $795m of funded debt.
To implement this restructuring agreement, the airline has commenced a prearranged Chapter 11 process in the United States Bankruptcy Court for the Southern District of New York.
Existing bondholders are also providing $300 million in debtor-in-possession, which along with Spirit’s cash reserves, is expected to help the company through the bankruptcy process.
Ted Christie, Spirit’s president and CEO, said he was “pleased we have reached an agreement” with bondholders that he said shows a “strong vote of confidence in Spirit and our long-term plan”.
“I’m extremely proud of the Spirit team’s hard work and dedication, which is key to our sustained progress in advancing our business and delivering for our Guests.”
Spirit hopes to emerge from the Chapter 11 process by the first quarter of 2025 in an “even better positioned to deliver the best value in the sky”.
“Other airlines that are operating successfully today have undertaken a similar process,” they added.
As a result…
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