Beleaguered budget carrier Spirit Airlines is desperately trying to reassure worried travelers that it is not about to cease operations this weekend, as it reaches a critical date in its Chapter 11 bankruptcy proceedings to unlock vital new funding.
Rumors of Spirit’s imminent demise started to circulate on Friday after executives from two major U.S. airlines told the respected aviation journalist Jon Ostrower that they were putting in place contingency measures should Spirit fold on Saturday.
Saturday is critical for Spirit as it is required to meet conditions in a Debtor-in-Possession agreement to unlock the next tranche of $475 million funding from lenders.
Given that Spirit is currently said to be losing around $3 million per day, the airline needs to secure the $100 million draw from the DIP agreement if it has any realistic prospect of remaining a going concern.
Spirit has been quick to try to quell the rumors of a potential shutdown, saying in a statement:
“There is no truth to any rumors that we are preparing to cease operations. It is business as usual at Spirit, and flights continue to operate normally.”
“We are working closely with our Debtor-in-Possession providers and other key stakeholders on a wide variety of issues to support the financial needs and future of the business, as we have throughout our restructuring process. These ongoing discussions remain productive.”
Spirit entered its second Chapter 11 bankruptcy process in less than a year in August. The airline says the aim of this Chapter 11 process is to significantly restructure its business, slashing costs in order to return to profitability as an indepedent carrrier.
In October, the airline reached a milestone DIP agreement with its lenders to unlock up to $475 million in funding split into several tranches. Funding tranches can only be released if the airline meets certain conditions.
The deadline to meet specific conditions for the next DIP draw is this Saturday.
