Budget airline Spirit filed for Chapter 11 bankruptcy this morning in what appears to be a controlled emergency landing rather than a disaster.
The airline will continue flying during the bankruptcy process, armed with an agreement with bondholders that will reduce total debt and provide some new working capital provided by bondholders. While this will provide the airline with enough funds to continue booking tickets and flying during the bankruptcy proceedings, it will likely emerge a smaller airline.
In Chapter 11 bankruptcy, the company, under court supervision, develops a plan to operate and to pay creditors over time. In the process, the original owners or shareholders will likely see their equity disappear into payments for secured creditors and suppliers.
Spirit has been weak financially since early in the pandemic; it had hoped to return to profitability or to merge with fellow budget carrier Frontier. That plan fell apart when JetBlue made a higher bid for the airline, but that plan was cut short by a federal court that ruled the merger would be anti-competitive.
