Budget air carrier Spirit Airlines filed for Chapter 11 bankruptcy protection in New York on Monday, citing $3.6 billion in funded debt and announcing a preapproved restructuring plan involving a debt-for-equity swap.

Declining Business Travel and Rising Competition Prompt Bankruptcy

In its early Monday filings, Florida-based Spirit Airlines attributed the bankruptcy to a sharp decline in business travel, heightened competition within the budget air travel market, and inflationary pressures. The company outlined plans to exchange $795 million in debt for equity as part of its restructuring efforts.

"I am pleased we have reached an agreement with a supermajority of both our loyalty and convertible bondholders on a comprehensive recapitalization of the company, which is a strong vote of confidence in Spirit and our long-term plan," said CEO Ted Christie in an official statement.

Financial Support Secured for Operations During Chapter 11

To support ongoing operations throughout the bankruptcy proceedings, existing bondholders have agreed to provide $300 million in Chapter 11 financing. In addition, they have committed to backstopping $350 million in new equity investment, according to the announcement. Spirit Airlines expects to emerge from bankruptcy by the first quarter of 2025.

Spirit Airlines Files For Chapter 11 : Spirit Airlines' History and Current Operations

Founded in 1964 as Clippert Trucking Co., Spirit Airlines transitioned to the air charter business in 1990 and adopted its current name in 1992. Today, the airline operates a fleet of 213 aircraft, serving over 100 airports across the U.S., Caribbean, and Latin America.

Spirit Airlines Files For Chapter 11 : Legal and Financial Advisors

Spirit has enlisted Alvarez & Marsal as its restructuring adviser and Perella Weinberg Partners as its investment banker. The airline is legally represented by Marshall S. Huebner, Darren S. Klein, Christopher S. Robertson, and Moshe Melcer of Davis Polk & Wardwell LLP.

Looking Ahead: Spirit Airlines Aims for Stability

With the Chapter 11 filing, Spirit Airlines seeks to stabilize its financial standing and position itself for long-term growth amidst an increasingly competitive landscape. The comprehensive recapitalization plan, backed by significant investor confidence, is expected to provide the necessary liquidity for Spirit to navigate this challenging period.