Spirit Airlines released on Friday that its bankruptcy exit plan had been approved, but investors in the stock responded with a sell-off.
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Spirit Airlines Reorganization Plan Approved
Spirit Airlines announced this week that its reorganization plan the airline filed had been approved and it was set to exit bankruptcy within the coming weeks. Spirit Airlines filed for bankruptcy late in 2024 following merger attempts that were approved by investors but struck down by regulators. The Dania Beach-based (Fort Lauderdale ) ultra low cost carrier (ULCC) filed for Chapter 11 bankruptcy protection in November and this is a reasonably quick turn around.
“On February 20, 2025, Spirit’s Plan of Reorganization was confirmed by the United States Bankruptcy Court for the Southern District of New York. This marks one of the last significant legal milestones on the path to exiting chapter 11, and Spirit expects to emerge from chapter 11 in the coming weeks.
Today’s approval is an important step forward for Spirit. The Company will emerge as a stronger airline, with the financial flexibility to continue providing Guests with enhanced travel experiences and greater value.
As Spirit finalizes its restructuring process, Guests can continue to book and fly without interruption and use all tickets, credits and loyalty points as normal.” – Spirit Airlines
The carrier has sold off some aircraft and had already operated the youngest, most fuel-efficient fleet in North America. With its extensive collection of all Airbus A320 family aircraft, many (including me) speculated that it would find an airline merger partner or become the target of an acquisition as growth has slowed
Investors Sell-Off But Why?
Stockholders of SAVEQ – the new version of the stock once it entered bankruptcy – entered a sell-off late Friday on the news. Here’s what the new plan entails that sent investors running:
“Under its plan, the airline will pass company ownership over to its primary lenders – which include Citadel Advisors, Pacific Investment Management Company and UBS Asset Management – as well as:
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Void existing equity shares
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Convert $795 million of its debt into equity
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Raise $350 million through new equity shares
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Open a new $300 million revolving credit facility
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Issue $840 million of new senior secured debt to existing bondholders” – SimpleFlying
Spirit, in essence becomes owned by its creditors and will no longer be publicly traded. Its shares will be cancelled and are now worthless, thus the run for the doors. No one knows when that will happen officially but investors that came in after the shares changed symbols from the public markets to OTC were gambling that Spirit would find a partner that wasn’t bankruptcy.
It looks like those hopes are now dashed.
Conclusion
While the carrier is exiting bankruptcy protection, the question: will Spirit Airlines survive remains valid. It has twice rejected Frontier’s advances while in bankruptcy, the last time just last week in which it seemed the two were simply negotiating. Many speculated that a legacy airline like United which has done everything it can to scoop up aircraft and pilots would have swooped in to purchase or JetBlue might have given it another try; its equipment was likely too new to work in Delta Air Lines model of adding cheaper aging equipment. But alas, it looks like Spirit will continue, for now, as an independent carrier until the firms can sell it off to a brave carrier that believe its can do more with the assets.
What do you think?
Future headline: Spirit goes back into bankruptcy, seeks merger with __________ (fill in the blank).
@John
Headline should read: Spirit goes back into bankruptcy via “Chapter 22” , seeks dance partner, and quick!!!
Remember, TWA had the distinction of going thru Chapter 33 before it was absorbed by AA.
My Prediction:
– Stalking Horse (1st bid): Frontier via Indigo Partners
– White Knight: United Airlines
– Black Knight: JetBlue with Carl Icahn providing the cash (second time is a charm)
– Long Shot: Southwest (desperate for airframes, any airframes)
– Waiting for Chapter 7: AA & DL ( also in need of airframes)
– Also waiting for Chapter 7: Alaska/Hawaii & Breeze (NYC & DCA slots…here we come!!)
TWA was never “absorbed” by AA. AA bought TW’s assets and brought the employees on as new hires .
The company lived on for some time as a shell before finally liquidating.
I suspect this is what will happen to Spirit.
The trouble with anyone jumping in is that they have a number of planes out of service because of the engines and who wants to buy a fleet that isn’t ready to be fully implemented?
Anyone that was still holding the stock when the announcement was made and trading halted almost deserves what happened. Greed was the only reason to have anything invested in Spirit, dreaming of a long shot score.
The writing was on the wall after the Biden DOJ showed its anti business bias multiple times.
Can’t take a man who skipped the AC signature suite seriously. Where’s Matthew???
He’ll be back on Monday through Saturday as it’s been for… six years.
Under the new regime WN is shedding frames…not procuring. Also, given last weeks butchering on Lemmon Ave I doubt they are looking to add staff to payroll.
WN’s situation with shedding airframes is a different situation. They had already planned on getting rid of these planes years ago as they reached their threshold for D checks. They have a pretty sophisticated matrix for calculating the value of an older plane as it reaches major scheduled maintenance.
They just expected the MAX’s would be here by now. They’ve decided to stick to their disposition schedule and suck up the loss of capacity.
As a Spirit Air Stockholder, didn’t think CEOs would be greedy enough to give themselves over $3 million bonuses while rejecting Frontiers merger offering & filing Bankruptcy which leaves loyal stockholders with nothing. I’ll never fly Spirit & advise others not to.
Marcia .. Marcia .. Marcia.
Restructuring that benefits the lenders completely and gives them complete ownership of the company – all upside and no downside. The debt-to-equity conversition gives the new secured debt – which is “secured” by the “new” equity from the conversion – holders (most likely UBS, PIMCO, and Citadel) priority in case of liquidation. Using the new $350m equity offering to dump on retail and wiping out existing shareholders in the process – nice lol. If Spirit does turn around there is a lot of upside with minimal risk. Nice play for the institutions.