After experiencing significant losses, Spirit Airlines seeks bankruptcy protection.

• Spirit Airlines CEO said customers can continue to book tickets on the airline.
• Since its acquisition by JetBlue Airways, Spirit has faced challenges such as an engine recall and weaker-than-expected sales.
• The company is facing mounting losses and has been given a deadline to renegotiate $1.1 billion in debt payments due next year.

After years of mounting losses, a failed merger, and more demanding consumer tastes, Ryanair, an icon of budget air travel that reshaped the industry, has filed for bankruptcy protection.

The airline announced on Monday that it had reached a deal with its bondholders for $300 million in debtor-in-possession financing to help it through bankruptcy, which it expects to end in the first quarter of next year. The airline stated that vendors and aircraft lessors would not be affected.

Customers can book tickets as the airline expects to continue operating.

Customers can continue to book and fly now and in the future, according to Spirit CEO Ted Christie, who stated in a letter on Monday that tickets, credits, and loyalty points can be used normally.

Since American Airlines filed for Chapter 11 13 years ago, Spirit is the first major U.S. airline to do so.

The airline, based in Dania Beach, Florida, has faced challenges such as an engine recall, increased costs due to the pandemic, and a failed acquisition attempt by , which was blocked by a federal judge on antitrust grounds. As a result, its shares have dropped more than 90% this year.

The airline kept pushing back the deadline with its credit card processor to renegotiate $1.1 billion in loyalty bonds due next year or risk losing the ability to process transactions.

The company announced on Monday that it had reached a deal with bondholders for $350 million in equity and that it would complete a deleveraging transaction to equitize $795 million of funded debt.

The New York Stock Exchange will delist Spirit Airlines after the company filed for bankruptcy protection in the U.S. Bankruptcy Court of the Southern District of New York.

Spirit announced that it had to postpone its quarterly report and was in talks with a majority of creditors for a deal that would not affect customers, vendors, suppliers, and others, but would eliminate the company's existing equity.

Spirit stated that it anticipates its third-quarter margins to be 12 percentage points lower than the previous year, with sales being $61 million lower and costs increasing while fares decreased.

Since 2019, the airline has been in the red, with a loss of over $335 million in the first half of the year alone.

Spirit Airlines has sold 23 Airbus aircraft to GA Telesis, generating $519 million in revenue. This has helped the airline to maintain its liquidity, with an expected $1 billion in cash at the end of the year.

In addition to furloughing approximately 200 pilots in September, the company intends to furlough an additional 330 pilots in January as it reduces its routes. However, analysts predict that the airline will need to further reduce its size in bankruptcy in order to effectively manage expenses.

The Spirit way

Over the past decade, Spirit's business model of providing low-cost fares and fees for various services, such as seat assignments and cabin baggage, has been successful among price-sensitive customers, enabling it to grow.

Spirit Airlines' bare-bones service became a popular joke among stand-up comics. A greeting card featuring one of their yellow planes reads: "I would fly Spirit Airlines for you."

Basic economy fares were introduced by carriers like , and , in response to the low-fare and add-on-fee model.

Despite the pandemic, Spirit faced challenges when costs increased across the industry and travel restrictions were lifted, resulting in a surge in international bookings outside of its network. As a result, fares in the oversupplied U.S. market fell.

This summer, airlines began offering bundled fares with seat assignments and other perks, as well as a premium "first-class" option with larger seats at the front of the plane, as many travelers have chosen to pay more for more spacious seats on board.

In January, a federal judge blocked JetBlue's $3.8 billion planned acquisition of Spirit, which had a deal to merge with fellow budget airline in early 2022 before JetBlue swooped in with a bid in April of that year. Spirit shareholders backed JetBlue's all-cash offer.

Judge William Young, appointed by former President Ronald Reagan, stated that the JetBlue deal would increase fares and decrease competition among airlines. The airlines contended that the deal would aid them in better competing, particularly in the US where four airlines control approximately three-quarters of the market.

"Spirit is a small airline, but it has a loyal following," Young ruled. "This one's for you, dedicated customers of Spirit."

Some analysts expect Frontier and Spirit to resume talks in the coming months.