In November 2024, Spirit Airlines filed for Chapter 11 bankruptcy protection, after billions of dollars of losses since the start of the pandemic, plus a failed takeover by JetBlue. We knew that the airline was planning on a quick bankruptcy process, and there’s now a major update, as this process has been completed. What I can’t wrap my head around is what the company’s plan is, exactly.
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Spirit Airlines exits bankruptcy, taken private
As of March 12, 2025, Spirit Airlines has exited Chapter 11 bankruptcy protection, via a lender-backed take-private deal. With this, control of the airline has gone to a group that includes Citadel Advisors, Pacific Investment Management Co., and Western Asset Management Co.
In recent times, Frontier Airlines tried to make multiple bids to acquire Spirit while in bankruptcy, but that was ultimately rejected, with Spirit claiming it wouldn’t deliver as much value to creditors.
This restructuring deal sees the airline cutting around $795 million in debt, with bondholders committing to injecting $350 million into the company, via an equity-rights offering.
Existing shares of Spirit Airlines stock have been canceled. Newly issued shares now held by Spirit’s new owners are expected to trade in the over-the-counter marketplace, and the company hopes to re-list its shares on a stock exchange as soon as reasonably practicable.
Ted Christie continues to be the company’s CEO, and he had the following to say about the company completing its financial reorganization:
“We’re pleased to complete our streamlined restructuring and emerge in a stronger financial position to continue our transformation and investments in the Guest experience. Throughout this process, we’ve continued to make meaningful progress enhancing our product offerings, while also focusing on returning to profitability and positioning our airline for long-term success. Today, we’re moving forward with our strategy to redefine low-fare travel with our new, high-value travel options.”
“I’m incredibly proud of our Team Members for their continued dedication to our Guests and each other throughout this process. Despite the challenges we’ve faced as an organization, we’re emerging as a stronger and more focused airline. On behalf of the executive team, I would also like to thank our outgoing board members for their contributions and invaluable service to our airline.”
But how does Spirit stop losing bundles of money?
While it’s great that Spirit Airlines has had a pretty quick bankruptcy process, I can’t actually wrap my head around what the strategy is here. Spirit’s problem wasn’t simply that it had a huge amount of debt, but also that the airline has been reporting massive operating losses, and continues to do so.
Spirit’s operating losses are just unbelievably bad, and keep getting worse. For example, in 2024, the airline had a negative 22.5% operating margin, with an operating loss of $1.1 billion on $4.9 billion of revenue. Not only that, but nothing about the carrier’s financial performance actually seems to be heading in the right direction.
That performance is significantly worse than the previous year. The company’s yields have dropped, the average revenue per passenger segment has dropped, etc. As Spirit has tried to become more “premium” and has eliminated fees, the carrier’s financial performance has only worsened.
Injecting $350 million into the company? Great, Spirit will burn through that in a matter of months just operating flights! I just don’t see any way that Spirit continuing to operate independently will work out, because numbers don’t lie.
Do the new owners want to break up the company and sell individual components? But what is there to sell at this point, with a vast majority of aircraft leased. Or is there some advantage to trying to reach a deal with another airline outside of bankruptcy, rather than in bankruptcy? At this point, I don’t see any planet on which Spirit has an independent future.
Bottom line
Spirit Airlines has emerged from bankruptcy protection, and has been taken private, with several investment firms partnering to own the company.
Given that Spirit’s operating losses are now exceeding a billion dollars per year, and given that the company’s financial performance keeps getting worse, I’m scratching my head as to what the strategy is here. Injecting $350 million into the company will cover the carrier’s operating losses for several months, maybe.
What do you make of Spirit emerging from bankruptcy, and what do you think the plan is?
I think Spirit needs to rename the airline and repaint the exterior of the planes (get rid of the tacky yellow). Spirit has such a horrible reputation with customers that many will simply refuse to fly it basically no matter the price. The company will likely eventually be sold for parts or merged, but if it wants to reinvent its business it should focus on its Florida hubs and on being a top airline to...
I think Spirit needs to rename the airline and repaint the exterior of the planes (get rid of the tacky yellow). Spirit has such a horrible reputation with customers that many will simply refuse to fly it basically no matter the price. The company will likely eventually be sold for parts or merged, but if it wants to reinvent its business it should focus on its Florida hubs and on being a top airline to the Caribbean and the northern parts of Latin America. No more cross-country flights to Las Vegas.
It should start partnerships with the other airlines to get customers to the southeast where it can then take them further south. Reduce cabin density enough to make the flights comfortable and stop nickel-and-diming on food and drink. Partner with the cruiselines and theme parks to create travel packages that include travel to the cruiseport or amusement park (both the flight and the shuttles). Since Florida traffic is congested and confusing for visitors it could create a niche for itself with customers who don't want to have to rent a car.
I don't chime in much anymore, but as someone with a fair bit of experience in finance, public M&A and bankruptcy (including so-called 11 + 11 = Chapter 22!), I can tell you that "Never in Doubt" is likely correct: asset sale. Many here will recall that that's how AA "acquired" most of TWA, for just one of many examples.
TW was bankrupt.
PE funds look for some way to make money.
Asset sales aren't out of the question but it is also possible they could orchestrate a merger with someone - likely F9 - or they could position NK post chapter 11 to do what other airlines can't do, including F9.
let's not shovel the dirt over NK's casket just yet.
What's next?
1. If management was so self serving they'd get a deal with Frontier and quick
2. Flounder for another 12-18 months and re-enter bankruptcy. At that point hope for either a government bailout/freebie or funding from interested parties (starting with Airbus) to get them out of Chapter 11 again
3. After step two look for an acquisition party or become another Pan Am, Eastern or TWA.
The days of flying...
What's next?
1. If management was so self serving they'd get a deal with Frontier and quick
2. Flounder for another 12-18 months and re-enter bankruptcy. At that point hope for either a government bailout/freebie or funding from interested parties (starting with Airbus) to get them out of Chapter 11 again
3. After step two look for an acquisition party or become another Pan Am, Eastern or TWA.
The days of flying people around on $49 fares, trying to hopefully rip them off with unknown ancillary fees are over. Not unless there's another significant and profitable stream of revenue.
the financial system did what it is supposed to do.
NK had a failing financial system, its owners (the former shareholders) lost everything as the company restructured under chapter 11 of the US bankruptcy code, a process which has been used by most of the airlines that still operate in the US.
NK is now privately owned so there will be much less transparency about their financials - but they won't have secrets because...
the financial system did what it is supposed to do.
NK had a failing financial system, its owners (the former shareholders) lost everything as the company restructured under chapter 11 of the US bankruptcy code, a process which has been used by most of the airlines that still operate in the US.
NK is now privately owned so there will be much less transparency about their financials - but they won't have secrets because the US DOT requires all airlines to report enough data such that the world will know enough of the financials of every US airline in time.
The private equity firms that bought NK believe that NK has done what needs to be done to turn the company around - or prepare it sufficiently for another carrier to acquire it.
that is all that matters....
the only detail that many forget is that NK was one of the early US airlines for the Pratt and Whitney Geared Turbofan version of the A320 NEO family. There are hundreds of aircraft in that family and others that use that engine because every western new generation aircraft except the 737MAX uses that engine exclusively or as an option.
Most airlines say that the GTF engine situation will dramatically improve in 2026 which means that NK - along w/ other airlines which include B6, DL and NK in the US - will gain a huge amount of additional capacity in a little over a year.
NK's business plan may not turn around dramatically until then other than reduced debt. but having a bunch of new aircraft coming back to service will significantly increase revenue generating capacity.
and thousands of NK employees have left the company - so costs are lower.
I’ve been flying Spirit for a decade and a half to see family. I keep a few sets of clothes at my daughter’s house so that I don’t have to take luggage and pay too much for baggage. I bring snacks in my backpack because Spirit charges too much for those. I am not the norm, but I do see a lot of empty space in the overhead bins, and not many snack purchases either.
Spirit is going to have to raise ticket prices.
Do you think its safe to book a ticket on Spirit right now for travel in May? What about for travel further out that that?
@ JB -- Financial stability aside, my bigger issue with booking a ticket on Spirit (or other ULCCs) weeks or months in advance is that the airline is constantly adjusting its schedule, so you can't be assured your flight will operate as planned. But if it's a good deal, you can always book, and if there's a change you can get a refund. That of course doesn't necessarily help with getting to your destination, though...
Asset sale.
Whole or in parts.
Six months from now and they’ll be in the same sinking boat. Just kicking the can down the inevitable road. With a recession incoming, this airline will be probably be gone for good later this year.
Though I realize that it's all we have to go on, using pre-bankruptcy quarterly losses, won't give us an accurate picture of how the new carrier will perform. Even assuming that revenues remain the same, costs are likely to have been significantly lowered.
Whether they're low enough to meet/match/exceed that cost is anyone's guess, but we really just won't know until they put up 2Q and probably 3Q's figures.
@ ImmortalSynn -- Sorry, costs have been lowered how? Unlike many other airlines that went through Chapter 11, the airline didn't renegotiate its labor contracts or its existing lease agreements, unless I'm missing something.
Even if we were to assume that some costs have been lowered, keep in mind that Spirit's average revenue per fare and revenue per available seat mile have decreased. That's on the revenue side, not the cost side...
Yes I know that they didn't touch labor agreements nor airframe-related debt. But from what I remember, CNBC reported near the beginning of their bankruptcy that their initial stated goal was to lower recurrent costs by $80 million plus, and later reported around a month ago that they'd met that goal. What I don't know is the frequency of that cost. If it's monthly, then that's pretty decent. Quarterly, not so much. Annually, a joke.
...Yes I know that they didn't touch labor agreements nor airframe-related debt. But from what I remember, CNBC reported near the beginning of their bankruptcy that their initial stated goal was to lower recurrent costs by $80 million plus, and later reported around a month ago that they'd met that goal. What I don't know is the frequency of that cost. If it's monthly, then that's pretty decent. Quarterly, not so much. Annually, a joke.
But to be honest, I can't find it clarified anywhere. That's why I wrote we'll probably have to wait.
@ ImmortalSynn -- Yeah, that $80 million number is annual cost reductions. So if the airline can do that 14 more times, then it might be able to break even, assuming things finally stabilize. :p