What Does Spirit Airlines Bankruptcy Mean for Your Travels?
The news of Spirit Airlines bankruptcy has created quite a buzz recently. The news has raised eyebrows from travelers and industry gurus. How does this filing affect passengers and the future of the airline? Let’s find out.
Spirit Airlines Bankruptcy... But Why?
Mounting Financial Losses
Over the last few years, Spirit
Airlines has hemorrhaged money. After the carrier retained profitable long past
most of its rivals became up, higher operating costs, competitors and a
swinging post-pandemic place shrank earnings.
M&A Gone Wrong
United's attempts to consolidate
with various carriers, especially JetBlue Airways, have been thwarted by
regulators. Antitrust regulators blocked the proposed $3.8 billion merger
because they were concerned it would lessen competition and raise fares.
Problems with the Engines and Other Operational Disruption
Mechanical problems of its own,
particularly with Pratt & Whitney Geared Turbofan engines have also taken a
toll on Spirit. These issues led to the grounding of many Spirit Airbus A320
aircraft, which was a devastating operational limitation for the company
because it was also facing significant financial stress.
Spirit Airlines Bankruptcy Explained
What is Chapter 11?
Chapter 11 is a bankruptcy
process that enables companies to keep running while reorganizing their debts.
It gives the airline some space to negotiate with creditors and reorganize its
financials.
How It Impacts Businesses
Chapter 11 does not concern
itself with the liquidation of a company, as is the case with Chapter 7. Spirit
for its part has to negotiate with bondholders to lower liabilities and raise
more funds.
Current Operations – An Assessment
Will Flights Be Canceled?
Spirit Airlines intends to
operate business as usual for the time being. This means that passengers are
still able to buy flights and previously booked ones will stay in effect. That
said, there might be some schedule shifts while the airline works through its
restructuring.
Spirit Airlines Bankruptcy effects on Customer Service
Spirit has promised customers
that their tickets, credits and fairstand won’t change. That said, travelers
continue to be caution as things are subject to change and no one can predict
the future..
Holiday Travel Concerns
Travel during Thanksgiving and winter
As the holiday travel season
looms, travelers are on alert for possible interruptions. Thanksgiving flights
won't be impacted according to experts, but a frostier schedule change could
come in winter depending on how the bankruptcy process plays out.
Full Schedule Changes
Spirit plans to cut its
capacity and rebook or combine some of those flights onto others, if necessary.
Travelers should check the status of their flights regularly and remain in
contact with the airline for updates.
Impact to ticket holders and loyalty points due to Spirit Airlines Bankruptcy
What Happens With Current Bookings?
Spirit previously indicated
that current reservations would not be affected for now. Flights should be
unaffected for the most part, but it is respective to check for flight updates
or messages from the airline.
Are Frequent Flyer Miles Still Usable?
You might still be able to
redeem your loyalty points. The latter two are critical differentiators as
frequent flyer programs represent valuable assets and it is highly likely
Spirit will keep its program intact during this storm in order to preserve
customer loyalty.
Spirit Airlines' Debt Restructuring Proposal
Bondholders and New Financing
Under its bankruptcy filing,
Spirit has lined up a $350 million equity investment from existing bondholders.
It will also get $300 million in debtor-in-possession financing to keep it
going while it restructures.
A Roadmap to Pay Down Debts and Boost Liquidity
The airline plans to reduce its
overall debt & increase financial flexibility so that it can best prepare
itself for long term success. The strategy includes negotiating with creditors
and possibly divesting assets such as airport slots or gates.
Could Spirit Airways Be Merged or Liquidated in the Future?
They could also merge into one
of the bigger airlines.
Analysts have speculated a
merger could be next, with one strong airline likely swooping in to save
Spirit. This would give it a clean slate and put its operations on a more
stable footing.
Risk of going bankrupt
Liquidation is a nuclear
option, but it still on the table at this point if the financial restructuring
doesn't work. It could mean liquidating assets to satisfy creditors, and that
might spell the end of Spirit as a stand-alone airline.
Airlines Will Be Affected
Will Airfares Increase?
Spirit's ultra-low-cost
operation has held down prices at a lot of competition. Then less competition
could mean that the other airlines responding and slashing prices might have
felt less pressure to lower fares if the airline cut back or was swallowed up
by a stronger carrier—and higher prices would then be on the table.
What It Means For Budget Travelling
If Spirit cuts back on flight
options or merges with a full-service airline, which often charges more for
fares, budget-conscious travelers may be left without cheap flying choices.
The Big Promise of uninterrupted Customer Service
after
Different Refund and Compensation Policies
Spirit said it plans to follow
whatever rules the Department of Transportation finalizes, including refunding
passengers for canceled flights and rebooking them. But in case any problem
arises, the customers must seek that compensations at first.
Communicating With Passengers
The airline has had
communication with customers through email informing them of changes.
Passengers should monitor their email and the Spirit website for updates.
Legal and Regulatory Hurdles
Potential Mergers Could Draw Antitrust Issues
Previous merger attempts were
stymied by antitrust worries for Spirit. Mergers in the future will be closely
examined to ensure they do not lessen competition or harm consumers.
Department of Transportation: The Organization That Would Do It
The DOT released guidelines
mandating airlines make refunds available during long delays. These changes
will determine how Spirit operates while restructuring and, as a result, could
be cash negative for the airline.
Shareholder Reaction and Market Response
Stock Market Response
Spirit's shares plummeted after
the company declared bankruptcy and its stock is due to be delisted from the
NYSE. Investors will have to write down close to zero in the restructuring
plan.
From a Shareholder Perspective Going Forward
Which post-restructuring could
leave little to no equity for shareholders. It will now focus on making the
company financially sound again -- not on preserving shareholder value.
Spirit Airlines: What's Next?
Timeline of Restructuring
A minimum of a few months up to
about the lengthiest time frame of approximately 1 year for most Chapter 11
processes. Spirit anticipates being a smaller, more viable company with lower
debt and a more focused business by the middle of 2025.
Outcome and Future Scenarios
Spirit could be restructured
and run as an independent airline, it could become part of another airline or,
if worst comes to worst, its assets can be sold-off piecemeal.
Conclusion
Spirit Airlines Bankruptcy won’t affect the average traveler that much in
the short term but you may see things changing with low cost travel over time.
News will follow as the airline restructuring continues; new routes will be a
toss up.
People Also Asked-
Is Spirit going to (cancel) my flight?
Flights would remain largely unaffected.
Call the relevant Spirit
loyalty program customer service number → Have your tier level or member number
ready → Earned points can be credited to most other airlines + (up until
October 2023) If I want my Illawarra loyalty points reset back to zero.
Is Spirit In Merger Talks With Another Airline?
Sure — but a merger is not in
the works yet.
Once Spirit goes under, will the price to fly everywhere rise?
That's unlikely — especially if
Spirit winds down its operations or is subsumed into a larger carrier.