While it’s not over until it’s over, all signs point toward Spirit Airlines ceasing operations in the coming hours, after what can only be described as a wild ride…
Spirit Airlines runs out of cash, likely to shut down imminently
The Wall Street Journal reports that Spirit is preparing to stop flying, as the carrier has run out of cash, and has failed to reach a deal on a planned $500 million government bailout.
For context, Spirit is in Chapter 11 bankruptcy for the second time in two years. In recent weeks, we’ve known that the airline was on the verge of liquidation. The carrier’s financial situation was bad in the first place, but was only made worse by the the increase in jet fuel prices, which caused the company to burn through its little cash at an accelerated rate.
Spirit had asked for a government bailout, which was a concept that the Trump administration got behind, illogical as it may be. The plan was for the Trump administration to give the airline $500 million in funding, which would ultimately convert into taxpayers having a 90% stake in the airline.
However, it’s clear those negotiations fell apart in recent days. It appears that Spirit bondholders weren’t onboard with the plan, which is logical enough, from their perspective. That’s because a bailout would put the government ahead of other bondholders in terms of priority for the carrier’s assets. And with Spirit almost certainly continuing to lose money, there was virtually no upside to this plan for existing bondholders.
So with the rescue plan not coming together, and the airline running out of cash, the expectation is that operations will cease in the coming hours. Stay tuned…
Spirit’s failure is a sad but overdue development
With Spirit likely ceasing operations, it’s incredibly sad to see so many people potentially losing their jobs. Spirit has some really great employees, and they’ve acted with such professionalism, despite the incredible challenges they’ve faced.
I have nothing but respect for them, and hope they all find other jobs in the industry in the near future. People of course often make fun of Spirit’s customer profile (unfairly, I think, but that’s besides the point), but seriously, Spirit has some of the industry’s nicest employees, especially the flight attendants.
Propping up a failing airline for years on end just doesn’t accomplish anything, and my hope is that this development means that other airlines, like JetBlue and Frontier, have a better chance of survival. In particular, this leaves a huge gap in Fort Lauderdale (FLL), Spirit’s biggest station, so let’s see who fills that.
I don’t want to get too far ahead of myself here, so let’s first see what happens in the coming hours. It goes without saying that there will likely be a lot of capacity adjustments from other airlines to fill in to reflect the new reality.
Bottom line
Spirit Airlines is reportedly hours from ceasing operations, after a $500 million government bailout of the airline ultimately failed. Spirit has been in Chapter 11 bankruptcy twice in the past two years, the airline hasn’t turned a profit in seven years, and it has the industry’s worst margins.
While I’m really sad to see the airline potentially ceasing operations, this was ultimately inevitable, as you can only sustain these kinds of losses for so long. This at least spells good news for carriers like JetBlue, given the markets in which they compete. Competition is important, but so is a healthier industry where most airlines aren’t hemorrhaging money.
What do you make of Spirit potentially ceasing operations?
