Spirit Airlines, a budget carrier once heralded for low fares, is teetering on the brink of collapse just months after emerging from bankruptcy, as NBC News reports.
Having exited Chapter 11 protection in March, Spirit now warns that it may not survive another year without a cash infusion, battered by industry headwinds, unresolved structural issues, and staggering losses of nearly $257 million since its bankruptcy exit.
Let’s rewind to the start. Spirit, based in Dania Beach, Florida, entered bankruptcy in late 2024 and emerged in March after a swift process lasting under four months.
During bankruptcy, Spirit struck a deal with bondholders, swapping debt for equity. But it dodged tougher calls -- like renegotiating aircraft leases or shrinking operations -- that could have eased cash flow pressures.
“Spirit didn’t use the tools available to them in Chapter 11,” said bankruptcy attorney Brett Miller of Willkie Farr & Gallagher. This missed opportunity now haunts the airline.
Post-bankruptcy, Spirit walked into a brutal industry landscape. Consumers delayed bookings, U.S. planes flew with empty seats, and even profitable airlines slashed their rosy 2025 forecasts.
By August, just five months after exiting bankruptcy, Spirit issued a dire “going concern” warning. It admitted it might not last a year without more cash, sending shares of Spirit Aviation Holdings plummeting nearly 58%.
Meanwhile, stocks of rival airlines rallied, perhaps signaling market confidence in stronger players. Spirit’s credit card processor demanded extra collateral, and Fitch Ratings downgraded the airline, citing rampant cash burn and default risks.
“There’s a lot of incentive to keep airlines alive because there’s many constituencies that would be hurt badly,” noted James Sprayregen of Hilco Global. Yet, Spirit’s path remains rocky.
Spirit’s response? It’s slashing unprofitable routes, cutting jobs, and selling assets like planes and real estate to raise funds, moves that echo cost-cutting efforts from 2024.
The timing couldn’t be worse -- the post-summer, pre-holiday season is a low period for airlines, making it tough to offload aircraft. Still, pricing for planes and spare Pratt & Whitney engines holds firm, with Airbus A321neo engine rentals up 50% since 2019 to $15.8 million monthly.
Internally, the pain is spreading. Spirit plans to furlough hundreds of pilots, while hundreds of its 5,400 cabin crew members have taken temporary leaves with medical benefits intact.
Spirit’s woes aren’t just self-inflicted. A domestic flight oversupply has tanked airfares, hitting U.S.-focused carriers hard, while rising post-pandemic wages have gutted the low-cost model budget airlines like Spirit rely on.
Past missteps linger too -- failed merger talks with Frontier Airlines in 2024, a blocked JetBlue deal after a federal antitrust case, and a Pratt & Whitney engine recall since 2023 grounding planes haven’t helped. Now, aircraft lessors are shopping Spirit’s 200 Airbus jets to competitors.
For investors and wealth-builders watching this unfold, Spirit’s saga is a cautionary tale of market efficiency -- or lack thereof. Avoiding hard structural fixes in bankruptcy, combined with an unforgiving industry, shows how quickly capital can vanish when inefficiencies persist. If you’re holding airline stocks, scrutinize balance sheets -- Spirit’s 58% share drop could signal broader sector risks, though rivals’ rallies suggest selective opportunities.