(Reuters) -Spirit Airlines has filed for bankruptcy protection, it disclosed on Monday, after the pioneer of no-frills air travel in the U.S. struggled with a long run of quarterly losses and significant debt.
The airline’s woes deepened after the collapse of its $3.8 billion planned merger with JetBlue Airways in January and the impact of RTX’s Pratt & Whitney Geared Turbofan (GTF) engines snag that grounded many of its aircraft.
Spirit, recognized for its bright yellow livery, had been losing money despite strong travel demand, as it struggled with bloated costs.
The airline listed its estimated assets and liabilities in the range of $1 billion to $10 billion each, according to a court filing on Monday.
Spirit has entered into an agreement with its bondholders that is expected to reduce total debt and provide increased financial flexibility.
The airline, as part of the prearranged Chapter 11 bankruptcy protection, has received commitment for a $350 million equity investment from existing bondholders.
Existing bondholders will also provide $300 million in debtor-in-possession (DIP) financing, which, together with available cash, is expected to support the airline through the Chapter 11 process.
Spirit expects to be delisted from the New York Stock Exchange in the near term.
The company started out as a long-haul trucking company in 1964 before shifting to aviation around 1983. It offered leisure packages to popular destinations under the name Charter One Airlines and rebranded to Spirit in 1992.
The discount carrier became popular with budget-conscious customers willing to forgo amenities like checked bags and seat assignments.
Ultra-low-cost carriers, which excelled at keeping their expenses low and offering affordable, no-frills travel, have struggled since the pandemic as travelers prefer to pay extra for a more comfortable journey as they pursue experiences.
Spirit’s troubles, along with those at some of its rival budget carriers, have spurred talks of a flawed business model among some Wall Street analysts.
(Reporting by Shivansh Tiwary in Bengaluru; Editing by Sriraj Kalluvila)
