Spirit Airlines has warned investors that its very existence is in jeopardy and that there is “substantial doubt” that the company can continue as a going concern within the next 12 months.
The warning comes just months after the Florida-based ultra-low-cost carrier successfully exited a pre-packaged Chapter 11 bankruptcy, which was meant to secure Spirit’s future.
The bankruptcy process required Spirit to take on hundreds of millions of dollars of debt, but investors pledged this debt on the promise that the airline would have a certain amount of liquidity in the bank.
On Monday, however, the airline revealed in an update to the US Securities and Exchange Commission that its financial results were not improving at a rate fast enough to keep up with the minimum liquidity covenants.
“The company has continued to be affected by adverse market conditions, including elevated domestic capacity and continued weak demand for domestic leisure travel in the second quarter of 2025, resulting in a challenging pricing environment.”
In other words, Spirit is being forced to heavily discount fares to attract flyers, but is still operating flights with too many empty seats to make the revenue that it needed to finance all the extra debt it took on in March.
To add to the pressure, Spirit’s credit card processing vendor has demanded that the airline provide additional collateral or it won’t renew its agreement when the current contract comes up for renewal at the end of 2025.
Spirit had been hoping to improve its margins by going more upmarket with new products like Premium Economy, but the current economic environment means pricing pressure will continue to hit Spirit’s bottom line for the remainder of the year.
In an attempt to shore up its finances, the airline has already announced plans to furlough hundreds of pilots, but Spirit now intends to go much further, announcing it will:
- Sell some aircraft.
- Get rid of real estate.
- Offer spare airport gates to rivals.
“While it is the Company’s goal to execute on these initiatives, there can be no assurance that such initiatives will be successful,” the filing warned.
“Because of the uncertainty of successfully completing the initiatives to comply with the minimum liquidity covenants and of the outcome of discussions with Company stakeholders, management has concluded there is substantial doubt as to the Company’s ability to continue as a going concern within 12 months.”
How Did Spirit Get To This Point?
The future for ultra-low-cost carriers like Spirit succeeding in the US aviation market has been called into question for some time, although Spirit’s road to this point has been pretty unique.
March 2022: Spirit Airlines and rival budget carrier Frontier announced a merger deal that would have created the fifth-largest airline in the United States, driving $1 billion in annual cost savings and allowing the combined carrier to better compete with larger legacy carriers.
May 2022: In a stunning turn of events, Spirit’s shareholders accepted a rival acquisition bid by JetBlue after the New York-based carrier inflated the airline’s worth. The plan had been to effectively dissolve Spirit as we know it today in order to massively expand JetBlue’s fleet.
January 2024: After years of legal wrangling, a federal judge blocked JetBlue’s takeover of Spirit, saying the acquisition would be bad for competition as many flyers rely on Spirit’s low fares.
October 2024: It emerges that Spirit has restarted merger talks with Frontier, but despite reaching an advanced stage, Frontier eventually decided to end talks, because it feared the terms of that deal could have put its future in doubt.
November 2024: Spirit announces it is entering Chapter 11 bankruptcy protection in a pre-packaged deal that saw the airline take on hundreds of millions of dollars in additional debt.
January 2025: Frontier makes a third attempt to acquire Spirit, but the then chief executive, Ted Christie, describes the Denver-based carrier’s offer as “woefully insufficient.”
March 2025: Spirit emerges from the Chapter 11 process and launches a plan to make the carrier more upmarket with various fare bundles.
April 2025: Ted Christie, Spirit’s long-serving CEO who had been at the helm of the airline for 13 years, suddenly announces he is stepping down.
Do you think Spirit Airlines can weather this latest storm? Let me know your thoughts in the comments below…
