Spirit’s New Labor Deal Clears Way for the Next DIP Financing

Spirit Airlines has reached tentative labor agreements with both the Air Line Pilots Association (ALPA) and the Association of Flight Attendants-CWA (AFA), representing a major step forward in its ongoing Chapter 11 bankruptcy restructuring.

The proposed deals include contract concessions and cost-saving measures designed to improve Spirit’s financial stability.

These labor agreements are also key conditions for the airline to secure its next round of debtor-in-possession (DIP) financing, which is crucial for maintaining operations and supporting its restructuring efforts.

Recently, the US Bankruptcy Court approved DIP financing of up to $475 million to fund Spirit’s daily operations. Of that total, $200 million is immediately available from the airline’s existing bondholders.

As part of shared sacrifice measures, Spirit’s senior executives have agreed to take pay cuts equal to or greater than the percentage accepted by pilots, once the labor deal is ratified.

Both agreements still require formal ratification by union members and final court approval.

Despite its current financial distress, Spirit projects a return to profitability by 2027, forecasting a net income of $219 million following $800 million in expected losses this year.

Photo by Ankush Kesri on Unsplash