Spirit Airlines’ second bankruptcy in a year is turning out to be one of the most intense restructurings to hit American business in a while. First, Spirit and United Airlines got into some sassy back-and-forth about whether the no-frills airline might go completely out of business. Now, Spirit is trying to improve on the results of its first Chapter 11 by slashing its fleet size. From FlightGlobal, an aviation trade outlet:
Spirit awaits a hearing before judge Sean Lane of the US Bankruptcy Court for the Southern District of New York, scheduled for 16 October, to determine whether the [the airline] will be relieved of lease obligations for dozens of aircraft – on top of the 27 aircraft leases that Spirit has agreed to reject through a new arrangement with Irish lessor AerCap. In total, [Spirit] is seeking to return at least 114 jets to lessors – more than half of its current fleet.
The publication added that Spirit had 215 Airbuses prior to declaring bankruptcy, with 149 in service at the moment. From the sounds of it, if Spirit can jettison these leases and emerge from bankruptcy, it’s going to be much, much smaller going forward. Ominously, FlightGlobal reported that the company said the planes should go because they will not be “used to generate revenue in Spirit’s business.” Translation: Spirit might never again operate at the scale it did in its heyday.
No-frills isn’t what it used to be
The low-cost airline business model was innovative: Why pay more for perks, or even certain onetime basics, if all you want to do is fly from point A to point B as cheaply as possible? But while no-frills had its day, the disruptions have now been absorbed by the big carriers, and this has undermined the success of Spirit and others. Fly Play, an Icelandic low-cost carrier that was using that island nation as a stopover for cheap flights to Europe, ceased operations on September 29.
Spirit’s first crack at restructuring led to a successful exit from bankruptcy, but the process clearly didn’t go far enough. Bankruptcy number two is really more of a continuation, with the company finally taking the tough medicine it previously avoided. Turnaround has given way to surrender. Unloading leases is just part of the plan. Spirit has also furloughed 270 pilots and intends to do the same with 1,800 flight attendants.
According to Sebastian Daily, a Florida newspaper (Spirit is based near Miami), “the carrier is discontinuing service to 13 airports” and “expects to cut its flight capacity by 25% compared to last year.”
The sharks are circling
The competition, CNBC reported, is already moving in, adding routes to snare fliers who don’t have Spirit as an option. JetBlue is among them, and the upshot here is that Spirit urgently needed a merger with that competitor to go through, but it failed in early 2024. The federal government argued that allowing the tie-up would be bad for consumers, but two bankruptcies later, the worst predictions for a stand-alone Spirit have come true. The question now is basically whether a seriously slimmed-down Spirit will retain any competitive capability if and when it exits Chapter 11.
In this analysis from the Stigler Center at the University of Chicago Booth School of Business, killing the JetBlue-Spirit merger was considered a big deal because it halted decades of consolidation in the airline industry. True, but it also valued Spirit’s potential to compete above its ability to survive. The best-case scenario is perhaps a restart for Spirit, a back-to-the-future maneuver that sees the airline re-disrupt the big carriers, maybe by being sort of less costly rather than truly no-frills. But while that would be a great vindication of the bankruptcy process, it’s unlikely that the legacy carriers would be caught off guard again.
