Spirit Airlines has filed for bankruptcy, the company announced today. The low-cost carrier is dealing with substantial financial challenges, including a decline in travel caused by the pandemic and a failed merger with JetBlue. According toAP News, Spirit has lost over $2.5 billion since early 2020 and is now facing more than $1 billion in debt payments due within the next year.
The airline has pledged to maintain operations during the Chapter 11 bankruptcy process. According to Spirit, customer bookings, existing tickets, credit points, and loyalty programs will remain unaffected and continue without interruption. This announcement follows a 25% drop in Spirit’s stock after a report by The Wall Street Journal about the company’s potential bankruptcy discussions, further contributing to a significant decline in the stock value since its profitable days in late 2018,CW39reported.
There appears to be a persistence of travelers choosing Spirit for their flights, although with a reduced spend per mile compared to last year 10% less to be precise, as perCW39. Revenue per mile from fares has dropped nearly 20%, a trend that has persisted despite the easing of pandemic restrictions and a broader increase in travel. Spirit is facing rising labor costs and heightened competition from major airlines offering similar low-cost fares, which have placed additional strain on the company s financial stability.
Spirit had tried to adapt by offering bundles that include extra amenities like larger seats and free snacks, marking a shift from its traditional a la carte pricing model. However, the airline plans to cut its flight schedule by nearly 20% in the final quarter of the year. Analysts from Deutsche Bank and Raymond James suggest this move could benefit competitors such as Frontier, JetBlue, and Southwest more than Spirit. Additionally, ongoing engine issues have resulted in multiple groundings of Spirit s Airbus jets, further impacting the airline s operations.
The U.S. has experienced several airline bankruptcies in the past, but this marks the first major Chapter 11 filing since American Airlines merged with US Airways in December 2013. While Spirit’s future remains uncertain, the company is preparing to navigate the challenges of restructuring under the protections provided by bankruptcy laws.
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