Spirit Airlines gets investment to exit chapter 11 without a merger

Spirit Airlines expects to emerge from Chapter 11 bankruptcy proceedings in the coming weeks after its plan of reorganization was confirmed by a US bankruptcy court. The airline will exit bankruptcy in a take-private deal that gives its major bondholders control of the company.

Spirit gets court approval for go-private deal

Since filing for bankruptcy in November 2024, Spirit's future has been unclear, particularly with a merger with Frontier Airlines looming large.

However, the airline looks all set to implement its independent 'Plan of Reorganization' after getting the go-ahead from the United States Bankruptcy Court for the Southern District of New York.

Presiding over the case, Judge Sean Lane gave his approval to the plan following challenges from the Department of Justice's bankruptcy watchdog, the United States Trustee Program (USTP), and the Securities and Exchange Commission (SEC).

Under its plan, the airline will pass company ownership over to its primary lenders - which include Citadel Advisors, Pacific Investment Management Company and UBS Asset Management - as well as:

• Void existing equity shares
• Convert $795 million of its debt into equity
• Raise $350 million through new equity shares
• Open a new $300 million revolving credit facility
• Issue $840 million of new senior secured debt to existing bondholders

Ted Christie, Spirit's President and Chief Executive Officer, commented,

When Spirit filed for bankruptcy, it was saddled with around $1.6 billion in debts and has faced a decline in demand as rival airlines offer more budget fares.

As a result, the airline is planning on enhancing the passenger experience in line with post-pandemic trends - this will include a new premium economy product, seat upgrades, free WiFi, complimentary refreshments, and more.

The carrier has also identified key areas that it is looking to transform, including increasing less-than-daily routes, removing unproductive markets and reducing capacity during off-peak periods.

Virtually unanimous support

Christie noted that the airline has had "virtually unanimous support from bondholders" throughout its reorganization process, indicating the level of confidence in its Plan of Reorganization.

As Simple Flying explored earlier this week, Spirit has been keen to go it alone rather than joining forces with Frontier Airlines. Frontier first attempted to acquire Spirit in 2022, but JetBlue swooped in and eventually secured a deal with the airline.

However, it was contested by the DOJ on antitrust grounds and eventually thrown out - this led Frontier to renew its attempts to merge with Spirit, but the latter rejected another proposal this month.

The carrier will now focus on streamlining its operations by cutting costs, including a reduction in fleet size and some job cuts.

Earlier this week, an internal memo penned by Christie informed employees that around 200 Spirit staff - primarily in admin and management positions - would lose their jobs. Christie added,

"As we move forward, our leadership team remains focused on reducing costs while also advancing our strategic initiatives to transform our Guest experience and position Spirit for success."

The airline is keen to stress that its operations will not be impacted by the ongoing bankruptcy process. Spirit has continued to fly to around 80 airports since entering Chapter 11 and will continue to do so as it reorganizes.

Spirit currently operates a fleet of almost 200 Airbus A320 and A321 aircraft, including both A320/A321ceo and A320/A321neo models. Last year it revealed it would sell 23 of its planes - amounting to almost 10% of its total fleet - in a deal worth $519 million.

The carrier has also been significantly impacted by the ongoing issues with Pratt & Whitney's GTF engines, which have forced larged chunks of its fleet to remain on the ground for inspections and overhauls.