On Friday, Spirit Airlines published an open letter to its guests announcing that the airline has filed for Chapter 11 bankruptcy. While operations will continue as normal for now, the bankruptcy process will involve redesigning its network, "rightsizing" its fleet and being delisted from the New York stock exchange.
Spirit Airlines has been in financial trouble since the pandemic. A recent report filed with the Securities and Exchange Commission (SEC) has raised concerns among investors and travelers about the company's viability beyond the next 12 months.
Here's a breakdown the numbers, the potential impact to budget travel, and tips to save on airfare no matter what happens. That way, you can keep jet setting and sticking to your travel budget.
How much trouble is Spirit Airlines in?
The 2024 Spirit Airlines bankruptcy made the company's financial woes painfully obvious. Since then, Spirit has been working through a post-bankruptcy restructuring plan. However, after posting a $245.8 million net loss last quarter, the company is now filing for bankruptcy once again.
This lack of cash flow has caused "substantial doubt" about Spirit's future. Without a significant injection of capital, the airline could go out of business.
The company's tenuous financial position is already impacting airline employees and travelers. Pilots are being furloughed. Flight attendants are being advised to assess and shore up their finances in case their routes get reduced or canceled.
Spirit has also begun to pull back in select markets, including Los Angeles, Las Vegas and Dallas-Fort Worth. As this latest bankruptcy process moves forward, travelers can expect even more routes to be cut and potentially fewer flights on the remaining routes.
What a Spirit Airlines shutdown could mean for travelers
So, what happens if Spirit Airlines becomes defunct? For starters, you’d no longer be able to take advantage of the company's cost-conscious fares.
Even if you don't fly Spirit, you could expect flying to cost more across the board. Fewer airlines in the market mean less competition, resulting in higher prices. Spirit's existence in the industry forces other airlines to offer discounted seats. When the company enters a new market, competitors lower their fares significantly.
But with Spirit gone, that pressure goes away. We're already seeing fare hikes in markets that Spirit has withdrawn from. Additionally, the remaining airlines may reduce the number of basic economy seats on their flights, thereby increasing the average ticket price.
Industry experts warn that a merger with another airline would likely have the same effect. However, after the failed joining of Spirit and JetBlue under the Biden administration, it's unclear if a merger would be an option.
If airfare increases as expected, what would that mean for travel and tourism in general? Many people may get priced out of flying, limiting their travel options. Family-friendly destinations may experience a decline in visitors, potentially resulting in layoffs. The death of this budget-friendly airline could have a significant adverse ripple effect across the industry and the economy as a whole.
Why you shouldn’t panic about a potential Spirit Airlines shutdown
While things are looking pretty grim for Spirit, its demise isn't written in stone. Auditors required the airline to use the phrase "substantial doubt" in their recent SEC filing, but that substantial doubt only comes into play if the company stays on the same course.
The CEO assured guests that the latest bankruptcy is part of the company's overall effort to "ensure the long-term success" of Spirit Airlines. In addition to filing for Chapter 11 bankruptcy, Spirit is:
- Planning to sell planes, real estate and airport gates to raise funds
- Adding strategic new routes, such as Newark, NJ to Savannah, GA and Ft. Lauderdale, FL to Belize to serve travelers in higher-demand areas
- Installing extra legroom seats in their aircraft and implementing a new dress code to attract higher-paying customers
At this point, we'll have to wait and see if the airline's efforts pay off.
Ways to save money on air travel
If Spirit Airlines is your go-to for booking flights, you may be more concerned than most about the company's current precarious position. Fortunately, it's possible to get a good deal on travel for your next adventure, no matter which airline you use.
Here are some strategies to consider:
- Book at the last minute. Airlines may be willing to offer discounts soon before takeoff to avoid having empty seats.
- Be flexible with your travel dates or destination (if possible). Modifying your itinerary by a few days or flying into another nearby airport could mean a big difference in ticket price.
- Use price tracking tools, like Google Flights. You can also use it to set up price alerts.
- Use travel rewards credit card points or miles. If you've banked enough rewards, you may be able to take a free vacation.
