By Shivansh Tiwary and Rajesh Kumar Singh
(Reuters) -U.S. no-frills pioneer Spirit Airlines filed for bankruptcy protection on Friday for the second time in a year after a previous reorganization failed to put it on firmer financial footing.
The Florida-based carrier, which emerged from its first bankruptcy in March, has been grappling with dwindling cash and mounting losses.
In the three months to end-June it reported a net loss of about $246 million. Faced with a cash crunch, the company said last week it borrowed the entire $275 million available under its revolving credit facility.
Spirit’s Chapter 11 filing was widely expected after it issued a warning earlier this month that it might not continue to operate if its financial results failed to improve rapidly.
“Since emerging from our previous restructuring, which was targeted exclusively on reducing Spirit’s funded debt and raising equity capital, it has become clear that there is much more work to be done and many more tools are available to best position Spirit for the future,” said CEO Dave Davis.
The company made the Chapter 11 filing in bankruptcy court in the Southern District of New York. Spirit said it was working productively with its secured noteholders, including with respect to potential financing that may become necessary later in the proceedings.
Industry analysts and executives say Spirit’s troubles stemmed from its failure to fix its bloated cost structure in the first bankruptcy. Its total operating expense in the latest quarter was $1.2 billion, which amounted to 118% of its quarterly revenue.
Spirit is also locked in a dispute with aircraft lessor AerCap Holdings over a deal covering 36 Airbus planes due for delivery between 2027 and 2028.
As part of its restructuring, the airline said it would reduce its presence in certain markets. It will also cut its fleet to significantly lower its debt and lease obligations. It estimates that would generate hundreds of millions of dollars in annual operating savings.
The airline’s struggles have created opportunities for rivals, with Frontier Airlines adding routes and eyeing further expansion. Analysts and industry executives say carriers such as Frontier, Southwest and United Airlines might be interested in picking up Spirit aircraft and other assets as it restructures.
Spirit said wages and benefits will continue to be paid and honored for those employed by the airline, including contractors. It will also meet go-forward obligations to its vendors and suppliers throughout the bankruptcy process.
