Spirit Airlines Files For Chapter 11 Bankruptcy

Everyone that has neared purchasing a flight has come across the low prices that Spirit Airlines offers in comparison to leading competitors such as American Airlines and Delta. Self-titling “Ultra Low Cost Carrier In The United States,” Spirit has fallen into debt, filing for Chapter 11 Bankruptcy with the goal to stablize it’s financial future.

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According to CNBC, the airline hasn’t turned profit since 2019, when it lost $335 Million, a period which was just about to experience COVID-19 at the time. The COVID-19 period was devastating for Airlines, according to the Bureau of Transportation Statistics, 

The March 2020 flight cancellation rate —17% of flights were canceled— at the time was the highest since September 2001, when 20% of flights were canceled. The cancellation rate was exceeded in April when 41% of flights were canceled.

It is important to note that Spirit Airlines carries one of the newest fleet of airplanes in the U.S., offering A319, A320, and A321, carrying better fuel economy if engines are placed at full efficiency. 

This was not the case, for there was a recall of Pratt & Whitney engines in 2023, which was affecting fuel efficiency, making competition with other airlines a hard carry on marginal costs.

Due to th instability of Spirits financial sector, an implementation of cost-saving measures has been established, The Associated Press reporting of 23 possible older planes being put up for sale. The combination of liquidating these old planes would amount to a $519 million entry, in combination with cutting jobs that would provide an additional source of income driven to profit.

Once the file for chapter 11 bankruptcy hit headlines, Spirit’s stock took a devastating plummet, leading to a 93% decrease in the past month. Going from $3.73 back in May 2024’ to a current standing of $0.15 in Nov 2024’.

As of November 23, 2024, Spirit Airlines has 203 aircraft in service and 79 on order, over the years increasing with the implementation of newer aircrafts such as the A320neo. The A320neo being a big chunk of the airplanes on order.

The biggest thing for a company filing for bankruptcy is getting out of it, and most of the time, it means merger. Although it becomes very hard when the incentive of the stock, for investors provides a market where price is extremely bearish long-term.

As of 2024, the Spirit Airlines merger, originally proposed with Frontier Airlines in 2021, has faced scrutiny from those seeing a bigger low-cost full efficient airline. The merger, aimed at creating a larger budget airline to compete with major carriers was challenged by the U.S. Department of Justice over concerns it could reduce competition and increase fares for consumers. 

Despite backing from both airlines' leadership, the deal has never received a final approval for completion. Spirit's potential merger with Frontier would create a formidable low-cost competitor, with a final decision still pending, Spirit Airlines is in a dire situation which leaves the future of having a low-cost full efficient airline uncertain.