Spirit Airlines' Bankruptcy: What Travelers Need to Know

• Spirit Airlines filed for Chapter 11 bankruptcy protection.
• The budget-travel icon said it will continue to fly.
• Spirit Airlines will have the opportunity to restructure and remain profitable.

Since 13 years ago, the first major U.S. passenger carrier has filed for Chapter 11 bankruptcy protection.

Despite rumors, the budget-travel icon is not shutting down. Instead, the filing will provide Spirit with time and protection to restructure and continue flying, bringing in much-needed cash.

On Monday, CEO Ted Christie communicated to customers that they can still book flights and utilize loyalty points or credits as usual.

Here's what travelers need to know:

Why did Spirit file for bankruptcy?

Since 2019, Spirit Airlines has been losing money, but its financial struggles intensified after the pandemic, as industry expenses increased, numerous Airbus jets were grounded due to an engine recall, and a federal judge halted Spirit's planned acquisition by.

The airline faced a deadline at the end of the year for its $1.1 billion in debt payments, which was linked to its credit-card processing agreement.

Spirit Airlines announced on Monday that it has reached a deal with most of its bondholders for a streamlined Chapter 11 bankruptcy protection plan. The airline expects to emerge from the process in the first quarter of 2025.

Is my flight still happening?

Filing for Chapter 11 bankruptcy protection allows an airline to reorganize its business, which may involve selling off assets or parts of its operation, but does not necessarily mean the airline will stop operating.

If Spirit makes any schedule changes or plans to dispose of aircraft, lay off pilots and flight attendants, it will impact the traveling public, according to Henry Harteveldt, founder of Atmosphere Research Group.

Airlines are likely to maintain as much of their schedules as possible during the holiday season, when they generate a significant amount of revenue from travelers, but further cuts may occur.

What am I entitled to if Spirit cancels my flight?

According to U.S. regulations, airline customers are entitled to a cash refund if their flight is canceled and they are not rebooked. Spirit Airlines announced on Monday that they will continue flying, and CEO Ted Christie attempted to reassure customers whose bookings will generate much-needed revenue during the busy holiday season.

Bankruptcy protection could make it more difficult to obtain a refund.

According to its website, if the airline or ticket agent has filed for bankruptcy, the company may be temporarily prohibited from providing refunds and/or vouchers to conserve assets.

If an airline that has filed for bankruptcy protection refuses to refund you for a canceled or significantly changed flight, your credit card may offer a refund under the Fair Credit Billing Act.

Buying a last-minute ticket to replace an original flight can be expensive due to high demand and limited seats, even if you receive a refund. Harteveldt advises travelers to purchase airline tickets with a credit card, which provides more cancellation protections than debit cards or cash. Alternatively, travelers can book a refundable ticket on another airline if they are concerned, although this can also be quite expensive.

Travel insurance might also cover pre-paid expenses if bankruptcy alters airline flights.

What happens next?

It is uncertain whether Spirit will exit Chapter 11 bankruptcy protection in the first quarter of next year. Airlines may emerge from this process as smaller, more cost-efficient airlines. Other airlines, lacking airplanes, may acquire some of Spirit's assets.

Spirit had a merger deal with a fellow discounter before JetBlue made a rival bid. There is a possibility that Frontier and Spirit could try to combine again, as some industry experts believe that the incoming Trump administration will be more favorable to deal-making.