Airline Steps Back to Recover After Two Major Deals Fell Through

On November 18, Spirit Airlines announced that it has finally filed for Chapter 11 bankruptcy protection. This follows a series of mounting losses, with the recent failed JetBlue merger deal being the cherry on top.

The low-cost carrier has had two major deals fall through in the last couple of years. In 2022, Spirit and Frontier announced a plan to merge. However, only two months after the reveal, JetBlue sweetened the deal with a $3.8 billion offer. This led Spirit to shut down talks with Frontier and proceed to organize a tie-up with JetBlue. 

Things were looking up for the airline until the US Department of Justice blocked the deal in March 2024. Judges claimed that the acquisition violated “the core principle of antitrust law: to protect the United States’ markets – and its market participants – from anticompetitive harm.”

This moment sparked speculation of Spirit filing for bankruptcy, though the carrier decided to hold off and attempt to recover. In October, Spirit announced that it was planning to sell multiple jets and issue an unspecified number of layoffs. It then revived talks with Frontier in hopes to finally get a merger to go through.

It didn’t take long for Frontier to ditch the acquisition efforts and leave Spirit to fend for itself. Within a week, Spirit announced that it would be filing for Chapter 11 bankruptcy and entering a deal with bondholders to reduce debt.

"This set of transactions will materially strengthen our balance sheet and position Spirit for the future while we continue executing on our strategic initiatives to transform our guest experience, providing new enhanced travel options, greater value and increased flexibility," stated Spirit President and CEO Ted Christie. "I'm extremely proud of the Spirit team's hard work and dedication, which is key to our sustained progress in advancing our business and delivering for our guests."

Under the arranged Chapter 11 bankruptcy protection, the airline will be receiving a $350 million equity investment from current bondholders. These bondholders will also be handing over $300 million in debtor-in-possession (DIP) financing to help keep Spirit up and running.

Spirit has assured guests that they will still be able to book flights, travel, and use loyalty points as usual.

FMI: www.spirit.com