Spirit Airlines today initiated its second Chapter 11 bankruptcy case in under a year, promising aggressive cuts and a comprehensive operational overhaul to transform the airline into a leaner, more efficient carrier.
Speaking at a first-day hearing in the U.S. Bankruptcy Court for the Southern District of New York, Spirit’s legal counsel, Marshall S. Huebner, emphasized that the airline’s latest filing represents a fundamentally different approach than its previous Chapter 11, which concluded earlier this year after U.S. Bankruptcy Judge Sean H. Lane approved a plan eliminating nearly $800 million in debt.
“This is really Spirit’s first Chapter 11 and not its second,” Huebner said. “Its challenges are almost tailor-made to be addressed by the provisions of the Bankruptcy Code.” The airline plans to leverage the “myriad tools” of Chapter 11 to cancel costly contracts, retire dozens of aircraft, and restructure its route network.
Spirit’s filing comes less than six months after emerging from its prior bankruptcy, prompted by operational and financial pressures, including a notice of default from its largest aircraft lessor, excess capacity, slack passenger demand, and maintenance issues affecting 38 planes equipped with Pratt & Whitney geared turbofan engines. The airline reported $1.02 billion in second-quarter operating revenue, a more than 20% decline from the prior year, and cited total debt between $1 billion and $10 billion in its bankruptcy petition.
In this second Chapter 11 case, Spirit anticipates saving hundreds of millions of dollars in maintenance liabilities, shedding grounded aircraft, and selling 19 planes. The airline expects these aggressive cuts to deliver a more comprehensive restructuring than the previous Chapter 11, which focused primarily on debt-for-equity swaps and an equity rights offering without asset sales or contract terminations.
Judge Lane approved several customary first-day motions, allowing Spirit to pay prepetition employee wages, meet critical vendor obligations, and maintain customer programs. The airline will also seek interim authorization to use cash serving as lender collateral, though it is not currently pursuing debtor-in-possession financing, having $275 million available under its revolving credit facility.
Spirit Airlines is represented by Marshall S. Huebner, Darren S. Klein, Christopher S. Robertson, Moshe Melcer, and Noah Z. Sosnick of Davis Polk & Wardwell LLP.
