Spirit Airlines entered Chapter 11 bankruptcy for the second time in less than a year on Aug. 29 with a goal of ensuring long-term success.
But the cash-strapped discount carrier faces a heavy lift to achieve the firm financial footing that it failed to attain during its first go at court-supervised restructuring, which ended less than six months ago.
"Finding investors willing to add more cash could be very difficult considering Spirit has few assets to use as collateral or to sell," said Bloomberg Intelligence aviation industry analyst Francois Duflot.
And, he added, the industry overall "probably would benefit from Spirit's failure, especially its direct competitor, which was a prospective buyer a few months/years back," he said, referring to Frontier Airlines.
Like during its first bankruptcy, which lasted from November 2024 until March 2025, the airline is continuing normal operations as it restructures. Loyalty benefits and ticket credits are still being honored.
Spirit said this second bankruptcy process will provide it with the flexibility to continue discussions with its lessors and financial partners.
"Since emerging from our previous restructuring, which was targeted exclusively on reducing Spirit's funded debt and raising equity capital, it has become clear that there is much more work to be done and many more tools are available to best position Spirit for the future," said Spirit CEO Dave Davis, who took that post in the aftermath of the previous bankruptcy.
During the second quarter, Spirit suffered a net loss of $245 million. Cash on hand as of June 30 had dwindled to just $407 million, though the carrier has since bolstered its liquidity through the sale of 14 spare aircraft engines for $250 million and by borrowing the full $275 million available to it under a revolving loan agreement. The carrier has also said it will sell more assets, which could include aircraft, real estate and airport gates.
Davis said Spirit will use the second bankruptcy to double down on efforts to reorient its network, scale back its fleet size and lower its cost structure.
Already, Spirit is slated to fly 23% fewer seats this month than a year ago, according to an analysis by consulting firm Ailevon Pacific. And based on comments from Spirit management, Deutsche Bank investment analyst Michael Linenberg estimates that the airline will reduce its active fleet of 157 aircraft by approximately 50 during the Chapter 11 process.
The second restructuring, or at least the timing of it, appears to have been forced by aircraft lessor AerCap, said airline industry analyst Brett Snyder, who writes the Cranky Flier blog.
Spirit has an agreement with AerCap under which the lessor took over the orders of 36 aircraft that had been on the Spirit books for 2027-28 deliveries. Spirit had agreed to lease those planes back from AerCap but then said in a regulatory filing that on Aug. 25, AerCap informed the airline that it is in default of that agreement, triggering lease termination fees of $75.6 million.
Spirit disagrees with the assertion that it is in default. The Chapter 11 filing, Snyder said, delays the issue and places it in the hands of the court.
The immediate losers from Spirit's new Chapter 11 filing are shareholders. The company was listed on the NYSE American exchange in April after shareholders had been wiped out during the previous bankruptcy. Now the new shares are expected to be canceled, as well.
Photo Credit: VIAVAL TOURS/Shutterstock.com
United's move to add frequencies and routes on city pairs flown by Spirit mimics a move by Frontier.
Both Snyder and Duflot raised the possibility that Spirit will end up converting this bankruptcy from a Chapter 11 restructuring to a Chapter 7 liquidation.
"At some point, to get out of this they're going to need external financing, and I'm not sure who would give that to them," Snyder said. "The last reorganization went so poorly it lasted only 5 months. So, lots of creditors are losing their shirts. Would you really take another chance on that?"
Spirit's best remaining option for attracting capital might be a merger. Frontier has been its primary suitor since the Justice Department blocked the airline's planned merger with JetBlue in January 2024. But Spirit rebuffed Frontier's entreaties over the winter.
Now, said Snyder and Duflot, with Frontier itself losing money and with Spirit having degraded further, Frontier might prefer to wait it out in expectation of benefitting from the demise of its main ultralow-cost rival.
"What would you get with Spirit that you can't get by yourself at this point?" Duflot asked rhetorically. "Frontier can mimic the routes. And they have plenty of planes already."