Throughout this year, Spirit Airlines kept assuring investors and customers it had a recovery plan—and bankruptcy was not on the itinerary.
However, after a federal judge blocked Spirit’s acquisition by JetBlue in January, those reassurances began to unravel, sending the low-cost carrier into a steady downward spiral. Had the deal gone through, JetBlue would have become the fifth-largest airline in the U.S. and could have jump-started Spirit’s recovery from its massive debt much sooner. Instead, Spirit Airlines’ shares dropped dramatically following that verdict.
Spirit’s merger dreams take a nosedive as Frontier backs out
Months later, a new glimmer of hope emerged: Spirit Airlines was banking on a last-ditch merger with rival Frontier, with the two carriers reportedly revisiting plans to join forces. But Frontier has now walked away from that deal, leaving Spirit’s future hanging by a thread, sources tell The Wall Street Journal.
Now, the carrier is preparing to file for bankruptcy and is in negotiations with bondholders to finalize a plan that would gain majority support from its creditors.
This isn’t news to aviation fans. Spirit has been struggling in an increasingly cutthroat market for a while now, and in recent months, it’s been pulling out all the stops just to stay in the game.
Since the summer, Spirit has been cutting jobs and selling off jets worth millions. In an October regulatory filing, the airline revealed it had identified about $80 million in cost-cutting measures. But all that proved to be insufficient: The inability to secure an investor or significantly boost revenue has been a glaring deal-breaker.
Surviving the crackdown on low-cost airline fees
Spirit has also felt the impact of an ongoing crackdown by the Department of Transportation and the Biden administration on airlines’ so-called “junk fees.” These regulations forced Spirit Airlines to halt cancellation fees and change fees in May.
Hidden fees and yield-pricing tactics have long fueled the success of low-cost carriers like Spirit, Ryanair and Southwest. Opaque pricing and add-ons often disadvantage consumers who aren’t savvy enough to navigate them, while more knowledgeable consumers tend to benefit from the extras paid by others.
One such tactic that has managed to slip through the cracks is the practice of charging extra for “preferred seating.” Airlines like Delta, American, Frontier, Spirit and Allegiant have all jumped on this method, offering passengers the option to pay more for seat selection. The move has sparked controversy, but for airlines, it’s an effective way to drive additional revenue. Unfortunately, it’s left many consumers frustrated, remembering a time when a single ticket included all onboard amenities without extra charges. “This is something many airlines used to let you request for free,” Chris Gray, deputy editor of UK-based consumer magazine Which? told CNN. “Now, being charged for it is irritating, especially for families who are told they need to pay to select seats to sit together.”
A flight to bankruptcy?
These customer concerns have clearly caught up with Spirit, whose service no longer holds the same appeal for U.S. travelers—it’s a matter of evolving consumer preferences that the airline has failed to address effectively. In today’s market, exceptional customer care is a top priority, and passengers expect a seamless, hassle-free experience from check-in to arrival. Airlines are now rated based on the entire travel experience, from the moment passengers walk into the airport.
Now is a time of urgent caretaking for Spirit. The carrier just inked a deal to offload 23 of its older Airbus planes to GA Telesis for $519 million. On top of that, they scored an extension to refinance a massive $1.1 billion in debt. Spirit is expected to file for Chapter 11, a type of bankruptcy that will allow the airline to continue operating while it works to reduce its debts.
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