Spirit Airlines, Incorporated filed voluntary petitions for reorganization and protection under Chapter 11 in the United States Bankruptcy Court for the Southern District of New York earlier today, Monday, November 18, 2024 in an effort to both preserve its business for the future and ensure that it emerges from its court-supervised reorganization of its business as a highly competitive and successful carrier in North America.
Spirit Airlines Files For Chapter 11 Bankruptcy Protection
The restructuring support agreement — which is otherwise known as RSA — is supported by a supermajority of the loyalty and convertible bondholders of Spirit Airlines, Incorporated on the terms of a comprehensive balance sheet restructuring, which is is expected to:
- Reduce the debt of Spirit Airlines
- Provide increased financial flexibility
- Position Spirit Airlines for long-term success
- Accelerate investments that provide customers with enhanced travel experiences and greater value
“The restructuring is expected to reduce Spirit’s debt, provide increased financial flexibility, position Spirit for long-term success and accelerate investments providing Guests with enhanced travel experiences and greater value”, according to this official press release from the airline. “In connection with the RSA, Spirit has received backstopped commitments for a $350 million equity investment from existing bondholders and will complete a deleveraging transaction to equitize $795 million of funded debt. To implement the RSA, the Company has commenced a prearranged chapter 11 process in the United States Bankruptcy Court for the Southern District of New York (the ‘Court’). Existing bondholders are also providing $300 million in debtor-in-possession (‘DIP’) financing, which, together with Spirit’s available cash reserves and cash provided by operations, is expected to further support the Company through the chapter 11 process.”
Timeline of the Long Road to Bankruptcy Protection and Reorganization of Spirit Airlines
The road to bankruptcy protection and reorganization was long: first, Frontier Airlines announced on Monday, February 7, 2022 the intention to merge with Spirit Airlines, which would have resulted in the creation of the fifth largest airline in the United States once the merger had completed…
…but then — in a surprise move which no one saw coming — JetBlue Airways confirmed that a proposal to acquire Spirit Airlines for $33.00 per share in cash was been submitted to the board of directors of the airline on Tuesday, April 5, 2022, which caused Frontier Airlines to abandon its plans to merge with Spirit Airlines on Wednesday, July 27, 2022.
JetBlue Airways Corporation then revealed more details and information pertaining to its definitive merger agreement of Spirit Airlines, Incorporated for $33.50 per share in cash on Monday, August 1, 2022 — which was approved by stockholders of Spirit Airlines on Wednesday, October 19, 2022 and brought the combined entities one step closer to creating the fifth largest airline in the United States once the merger was completed…
…but along with with the attorneys general of the Commonwealth of Massachusetts, the state of New York, and the District of Columbia, the Department of Justice of the United States sued to block acquisition of Spirit Airlines by JetBlue Airways on Tuesday, March 7, 2023, citing that the result would harm travelers in the United States due to further concentration and consolidation of the commercial aviation industry, which would result in higher fares and fewer choices across the country for tens of millions of travelers.
As a result — instead of becoming the fifth largest airline in the United States — the announcement of the official termination of the merger agreement between JetBlue Airways and Spirit Airlines was released on Monday, March 4, 2024.
Final Boarding Call
What all of this means to you as a customer of Spirit Airlines and as a member of the Free Spirit membership program: essentially nothing, as the airline will operate its business as usual — for now, anyway.
If you own shares of Spirit Airlines, that is another matter, as you do have cause for concern: know that the stock — whose ticker symbol is SAVE — has essentially become worthless after tumbling from its high price of $17.02 per share on Tuesday, December 26, 2023 to as low as $1.03 per share today, Monday, November 18, 2024…
…and according to the aforementioned press release: “As a result of the chapter 11 filing, Spirit expects to be delisted from the New York Stock Exchange in the near term. The Company expects that its common stock will continue to trade in the over-the-counter marketplace through the chapter 11 process. The shares are expected to be cancelled and have no value as part of Spirit’s restructuring.”
This means that once Spirit Airlines emerges from what it calls a “streamlined chapter 11 process” — as the company expects to happen during the first quarter of 2025 — new shares of stock will likely be issued from which current shareholders will not benefit…
All photographs ©2023 and 2024 by Brian Cohen.
