Spirit Airlines bankruptcy took a turn for the worse this week. President-elect Trump’s prior administration was friendlier to airline tie-ups but can Spirit wait out a solution?
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Spirit Airlines’ Bankruptcy
Last fall, Spirit Airlines filed Chapter 11 Bankruptcy in hopes of refinancing its long term debt. It secured $300 million just before it filed for bankruptcy protection but it wasn’t enough to keep the budget airline focused on leisure travel from the bankruptcy process. Once a hot merger and acquisition target, fellow ULCC, Frontier Airlines, and JetBlue Airways were engaged in a bidding war that ultimately JetBlue won at $3.8 billion. However, the Justice Department sued to stop the acquisition offering no terms nor concessions for approval (as it customary) and a federal judge struck the acquisition down.
Armed Security Personnel Walks Latest Layoffs Out of HQ
According to reports on social media and Airways Magazine, a new layoff of 200 staff members at Spirit Airlines Headquarters involved armed security personnel escorting employees out the door. The Facebook account for Aero Crew News on Facebook claimed to have multiple reports.
“Aviation airline crew groups on social media indicate that armed security personnel were present during employee dismissals at Spirit Central, the airline’s headquarters and training center in Dania Beach, Florida.
According to one commentator, “I’d be emotional too if the CEO of the place I worked took a 3.8 million dollar retention bonus and then my position was eliminated in downsizing efforts to trim cost due to the bankruptcy. So armed security seems understandable.” – Airways Magazine
It’s possible the determination to used armed staff vs unarmed security was a conscious one but this writer doubts it was a decision made by Spirit leadership.
Trump’s Administration Welcomed Airline Tie-Ups, Avoid Early Disasters
The Northeast Alliance, a codeshare relationship between American Airlines and JetBlue Airways in the US northeast was approved under the prior Trump administration. President Joe Biden’s justice department sued to reverse the partnership and won (though the carriers have expressed a desire to appeal the ruling as of late.)
Frontier edged closer to revisiting the topic at the last moment before Spirit ultimately filed for Chapter 11. Biden’s DOJ sued to unwind the NEA and then sued to block though it allowed Alaska’s acquisition of Hawaiian Airlines.
There’s no question the Trump Administration will want to avoid the collapse of an airline early in the President-elect’s second tenure. The author of The Art of The Deal will likely try to get something done as will his nominated Labor Secretary, Lori Chavez-DeRemer, a pro-union, pro-worker leader the Atlantic called, “The One Trump Pick Democrats Actually Like.”
Too Little Too Late?
Even if Trump’s administration would allow another carrier to merge with or acquire Spirit Airlines, shareholders have already been significantly harmed by the bankruptcy filing and latest rounds of cuts, unlikely to be reversed in a new deal. But as 200 staffers headed for the doors, cardboard boxes in hand, is there enough time for another airline to come in and buy the airline rather than just the assets?
President-elect Trump’s pick for Attorney General, Pam Bondi, sat for Senate confirmation hearings this week. While she was questioned on loyalty, prior ties, and whether she believed Joe Biden duly won the 2020 election, she was not questioned about her approach to mergers and acquisitions. However, in her opening statement she said,
“On the civil side, we worked to protect consumers. We tackled everything from overreach by big tech companies to off-label prescription marketing.” – Pamela Bondi via PBS
But Spirit is bleeding cash, it’s turned all of the levers it could before filing for bankruptcy, and with the latest layoffs it’s clear that a conclusion in one form or another is approaching. Can the newly elected president find a suitor for Spirit to join? Will Spirit be able to get an audience with the Trump team who has boasted a significant “Day One” agenda? His stated priorities range from lowering prices for groceries, stemming illegal immigration, mass deportation, a reduction in violent crime, trade wars, repatriating manufacturing, and purchasing Greenland from Denmark.
Conclusion
Spirit continues to take steps to preserve itself but it seems like it’s biding its time to get to a friendlier regulatory environment. That said, Frontier had a shot and Spirit can’t possibly be much cheaper than it was before, JetBlue probably no longer has the headwinds and investment support even to buy the assets. United signed a deal to top-up its fleet while it waits for Boeing 737 Max-10 certifications, in essence, without a clear path as designated by the incoming administration, it’s going to be more tough sledding and Spirit might not have the time to wait for a resolution.
What do you think?
You think as Trump starts his presidency he cares about the fate of NK!? Much bigger fish to fry
@SMR – I made a pretty clear case that it’s unlikely he will, thus Spirit might not be able to wait out getting on his agenda.
Hiring armed security for layoffs is SOP at this point for multiple reasons. Not defending or justifying the reasons for it, but for the safety of everyone it’s the correct decision.
And Spirit won’t end up in an equipment auction, someone will end up with the majority of the assets. It should have happened already but that’s another debate about the Biden DoJ.
@Dave Edwards – I agree with everything you have here.