On Tuesday, Spirit Airlines—the largest budget airline in the United States—took the plunge, filing for Chapter 11 bankruptcy protection. This is the company’s second filing in less than a year. Based in Dania Beach, Florida, the airline is currently in the process of stabilizing its financially troubled state. It’s doing this by inflicting drastic cuts to its network and downsizing its fleet.
To say Spirit Airlines has had a rough go lately would be an understatement. Just months after coming out of Chapter 11 protection in March, they entered bankruptcy a second time. In the last bankruptcy, Spirit’s debtholders took a fateful step. Their commitment to convert debt into equity allowed the airline to avoid deeper cuts. At first, projections called for a $252 million net profit for the year. In comparison, Spirit Airlines lost a staggering $257 million between March 13th and the end of June.
Of course, the airline makes things worse for itself with a saturated U.S. flight market. Even more, operational blowbacks, notably a large recall of Pratt & Whitney engines, have deepened these woes. The picture for Spirit’s financial outlook got even cloudier. This came in the wake of a JetBlue Airways’ failed takeover attempt being blocked in court.
As part of its latest bankruptcy strategy, Spirit Airlines aims to implement cuts that will save “hundreds of millions of dollars” annually. This step toward decreasing flights is part of an effort to cut costs and adjust to a long-term critical situation across the airline industry.
“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.” – Spirit CEO Dave Davis
The airline sector is in a time of constant upheaval. That instability, fueled by an unpredictable demand and outside factors, has forced the company to file for bankruptcy for the second time. Given these circumstances, Spirit Airlines is actively and urgently trying to regroup and refocus its business model to survive and thrive for the long term.