Another Bankruptcy for Spirit. Will This One Be Its Last Fight?

Spirit's troubles began with the COVID-19 crisis, which severely impacted travel demand. 

The airline had lost over $2.5 billion since 2020 and reported a $1.2 billion net loss in 2024. 

Struggling to recover after the pandemic losses, Spirit Airlines filed for bankruptcy in November 2024. The main contributing factors included surging operating costs, low profitability on its routes, increasing debt, and high competition. 

A failed $3.8 billion merger attempt with JetBlue also deepened Spirit’s financial troubles. In January 2024, a federal judge blocked the deal due to the risks of reduced competition and higher fares, killing all the hopes for Spirit’s rescue.

By the way, Spirit was the first major US carrier to enter bankruptcy since 2011. However, four months later, in March 2025, Spirit managed to emerge from it.

Chapter 11 bankruptcy protection is a legal process that helps a struggling business reorganize its debts and expenses to avoid shutting down.

Unlike Chapter 7 bankruptcy, where the business ceases operations, Chapter 11 gives a chance to renegotiate debt payments, downsize the company, and get help from financial advisors, all while continuing normal operations.

The company usually presents its financial situation to a bankruptcy court and proposes a reorganization plan, which must be approved by the court and creditors.

In our case, Spirit received approval for its restructuring plan from the US Bankruptcy Court for the Southern District of New York.

Spirit converted its debt into equity (ownership shares) rather than paying it back in cash.

Often, in a bankruptcy, there may not be enough cash flow to repay all debt. To address this, the company negotiates with creditors to exchange some or all of their claims (loans, bonds, leases) for equity. 

In this case, the airline followed a court-approved reorganization plan and equitized $795 million of debt. 

In addition, Spirit received a $350 million equity investment from existing investors to support future operations.

These measures significantly reduced leverage and gave the company a more sustainable capital structure.

Not so much. 

Despite the improved balance sheet, the airline still had to cut costs aggressively.

In early 2025, Spirit cut about 200 office and support jobs. The cuts were mostly to non-union roles, which is an easier way to reduce costs without having to negotiate with unions or face legal constraints that might apply to unionized staff.

The carrier also retired or returned older Airbus aircraft and delayed the delivery of new jets, decreasing fleet size and associated operating costs.

In mid-2025, Spirit announced plans to furlough 270 pilots and downgrade 140 captains to first officers. 

All told, Spirit’s payroll and operations continued shrinking to match its downsized network.

Because the first restructuring attempts were not nearly enough.

In mid-August 2025, Spirit warned about its nearly depleted cash. The carrier had lost almost $246 million in Q2 2025, up from $192.9 million the previous year. In fact, an August 2025 SEC filing had disclosed “substantial doubt” about the airline’s ability to continue operations due to weak leisure travel demand and tough competition.

By late August 2025, Spirit once again filed for Chapter 11 bankruptcy protection.

Analysts attributed the collapse to a “bloated cost structure” that Spirit had failed to fix in the first bankruptcy: The operating expenses had run at 118 percent of revenues. 

Ultimately, the company decided it needed another restructuring to secure its future.

Major airlines rushed to capture Spirit’s displaced customer base and market presence.

After Spirit’s second filing, United immediately jumped in, adding 15 new flights out of Chicago, Houston, and Los Angeles, among others. 

Patrick Quayle of United explained the flights would give Spirit’s customers alternatives “if Spirit suddenly goes out of business.” 

CEO Scott Kirby separately said that United won’t be bidding on Spirit’s assets. The thing is, Spirit’s fleet and airport slots don’t fit United’s operational model, and reconfiguring them would cost too much. 

Around the same time, Frontier Airlines announced over 20 new routes to Detroit, Houston, Baltimore, and other cities, overlapping with Spirit’s markets.

Another low-cost carrier is also not staying behind—Jetblue is expanding its operations at Fort Lauderdale-Hollywood International Airport (FLL), Spirit’s key market. Starting in November 2025, the airline will launch service to Cali, Colombia, and new international destinations such as Liberia, Costa Rica, and San Pedro Sula, Honduras.

Spirit’s restructuring plan centers on further shrinking and reorienting the business. 

The airline will be returning or selling aircraft and renegotiating leases. It is also repositioning toward higher-paying travelers and away from the ultra-low-cost segment by focusing schedules on the most profitable markets. 

As mentioned, the carrier has plans to reduce its flight capacity by 25 percent and furlough 1,800 flight attendants. Las Vegas will experience the steepest impact, with the airline slashing over 3,000 flights from its winter schedule. Other airports facing reductions include Los Angeles, San Jose, Boston, and Atlanta.

Spirit will end service to 11 US cities by early October 2025, including Albuquerque, Portland, Salt Lake City, and San Jose.

Despite the bankruptcy proceedings, Spirit has underscored that daily operations will not be interrupted. A September 2025 filing assured customers and employees that the airline had sufficient cash to maintain services. 

Ultimately, Spirit’s long-term survival depends on whether it can complete its second restructuring successfully. If not, Spirit risks liquidation or asset sales. In any case, competitors are already positioning to fill any void. 

For now, the airline is forced to aggressively right-size its fleet and staffing, rebuild cash reserves, and find a sustainable niche (potentially appealing to higher-paying passengers) in the crowded US market.

In short, COVID was tough on many airlines worldwide, but they avoided Spirit’s fate because they had larger government support, higher-yield revenue, and better long-term strategies.

For example, Ryanair had substantial fuel hedging, meaning it locked in much of its future fuel needs ahead of time to protect itself from big swings in oil prices.

Southwest, on the other hand, received government aid via PSP and CARES programs, which provided enough cash to keep payroll and operations running. 

Additionally, airlines with a more diversified network (e.g., premium offerings and better international traffic) had more stable revenue. In contrast, Spirit depended heavily on ancillary and price-sensitive leisure traffic, which can collapse more in weak demand periods.