Spirit Airlines files for Chapter 11 bankruptcy protection for the second time in a year

Spirit Airlines on Friday filed for bankruptcy protection for the second time in a year, just months after the country’s largest budget carrier failed find to sturdy financial footing when it came out of Chapter 11 protection in March.

Spirit debtholders agreed in the airline’s previous bankruptcy to exchange $795 million in debt for equity, but the carrier avoided bigger changes to cut costs, like getting rid of planes or more dramatically shrinking its footprint.

Spirit now says it will reduce its network and shrink its fleet, cuts that it said will reduce costs by “hundreds of millions of dollars” a year.

“Since emerging from our previous restructuring, which was targeted exclusively on reducing Spirit’s funded debt and raising equity capital, it has become clear that there is much more work to be done and many more tools are available to best position Spirit for the future,” Spirit CEO Dave Davis said in a news release on Friday.

In its filing, Spirit listed its assets and liabilities of between $1 billion and $10 billion.

The carrier sought to reassure customers that they can continue to book and fly on Spirit after its bankruptcy filing.

“Virtually every major U.S. airline has used these tools to improve their businesses and position them for long-term success,” Spirit posted on its Instagram account on Friday, written in white against a black background, uncharacteristic for the carrier that is often featuring its bright-yellow planes and tropical beaches.

In a court filing in December, Spirit had forecast a net profit of $252 million this year. But earlier this month, it said it instead lost nearly $257 million since March 13, after it exited Chapter 11, through the end of June.

Spirit warned a few weeks ago that it might not be able to survive a year unless it significantly increased its cash. It also said its credit card processor was seeking additional collateral. It then borrowed the entire $275 million available under its revolving credit facility and said that the card processor could hold back up to $3 million a day from the airline.

Spirit’s shares are down 72% over the past month and down 45% in after-hours trading on Friday.

Labor unions warned pilots and flight attendants earlier this month that more changes could be ahead. Hundreds of flight attendants are already on voluntary leave, and Spirit has planned to furlough hundreds of pilots this year to cut costs.

“This bankruptcy will be harder and look different than last year, but we will keep you closely informed and stick together as we move forward,” the Association of Flight Attendants-CWA told the carrier’s flight attendants on Friday after Spirit’s filing.

It said it expects more leaves will be offered. “As we communicated a few weeks ago, we urge you to take an honest look at your personal situation, examine all your options, and prepare for all possible scenarios,” the union said.

Spirit had struggled for years as it dealt with a glut of U.S. flights, a Pratt & Whitney engine recall and a failed takeover by JetBlue Airways, a deal that was blocked in court.

Spirit’s aircraft lessors had reached out to rival airlines in recent weeks to gauge executives’ interest in some of the carrier’s planes, according to people familiar with the matter, who spoke on the condition of anonymity because the talks were private. Spirit said Friday that it has been “actively engaged” with its biggest lessors, debtholders and others to “refine its path forward.”

The carrier is the United States’ largest budget airline, followed closely by rival Frontier Airlines, which has tried and failed to merge with Spirit repeatedly since 2022.

Frontier on Tuesday announced 20 new routes that compete with Spirit to win over its struggling competitor’s customers.

Spirit has been an icon of budget travel and its bare-bones service — and fees for bags and everything else — became a favorite punchline for comedians.

Over the years, larger airlines like American and United rolled out their own basic fares for price-sensitive customers, but with more perks on board like snacks and big global networks where loyalty members could use their miles for more destinations.

Another challenge was that many travelers, especially post-pandemic, have sought out pricier and more spacious seats on board, as well as more international travel. Spirit has tried to rebrand to bundle fares and provide more premium seating options, though competitors have still said they have an advantage in part because they have bigger networks and more brand loyalty.