Spirit Airlines will cut flights to emerge from bankruptcy

Spirit Airlines is preparing to shrink to a smaller version of its former self, focusing on high-demand travel periods and routes as well as expanding premium class seating in a bid to survive, according to a new plan it filed Tuesday in U.S. Bankruptcy Court.

Much of the airline's focus will be on flying to destinations from its main airports in Florida, Fort Lauderdale and Orlando, as well as the New York and Detroit area, CEO Dave Davis told CNBC.

Flights that don't touch those airports “will be an even smaller part of the network,” Davis said.

He declined to specify which routes could be cut, but pointed to high competition in flights between countries, as well as some weakness in demand for visits from friends and family, a key segment of air travel, in Latin America. He said some flights in Latin America would likely be cut, but the region would remain important to Spirit.

The budget travel icon said it will divest even more of its Airbus fleet as it plans to emerge from its second bankruptcy in less than a year. It is expected to emerge in late spring or early summer, Spirit's attorney, Marshall Huebner of Davis Polk, said at a hearing. Spirit said the changes will make the airline more agile and competitive.

The company said that under the plan it estimates it will have reduced costs and said its debt and lease obligations will be reduced from $7.4 billion to $2.1 billion after this bankruptcy.

Spirit will modify its network and schedules to increase aircraft utilization during periods of high demand and on popular flights. routes and to reduce usage during travel breaks. The airline also plans to expand its Spirit First and Premium Economy, as well as update its loyalty program.

The new fleet would be made up mostly of older Airbus aircraft, “with the possible rejection of additional high-cost NEO aircraft,” Huebner said, referring to the more modern Airbus A320 family of aircraft, adding that the exact size of Spirit's fleet will depend on discussions with counterparts such as aircraft lessors.

He said Spirit's annualized fleet cost would be reduced by another $550 million, 65% less than before its bankruptcy filing last year. Debtors have also anticipated another $300 million in cost savings from non-fleet cuts, he said.

Spirit has already reduced some of its Airbus fleet and furloughed pilots and flight attendants to cut costs as it reduced its network, although some cabin crew members were called back to work ahead of spring break.

Spirit has reached an agreement in principle with its creditors for the plan, Huebner said, adding that the secured lenders will make “material incremental liquidity available to Spirit through the release of cash collateral.”

In its second bankruptcy, Spirit had held talks to reach an agreement with Border Airlinesand with the investment firm Castlelake. Nothing materialized, but Huebner hinted that a combination could be back on the table.

“This emergence will allow Spirit to do many things from a position of strength and stability, including considering potential future industrial transactions,” Huebner said.

The path of the spirit will be challenging. It would pit a smaller version of Spirit against increasingly larger competitors that dominate the U.S. market.

Some U.S. low-cost airlines have struggled due to increased labor and other costs post-Covid, a growing consumer shift in favor of more upscale travel, and increased competition from larger airlines offering reduced fares.

“Because every day counts, and every dollar counts, the airline industry is as competitive today with this deal in hand as it was last Friday, and we must, and will, lock down what we need from other stakeholders and then begin a high-speed march to get this historic company out of Chapter 11 as soon as possible so it can write its next chapters from a position of strength,” Huebner said.

Spirit was uniquely challenged by a massive engine recall. Pratt and Whitney and a failed plan to be acquired by JetBlue Airwaysa deal voided by a federal judge in early 2024.

Spirit forecast it would generate a net profit of $252 million last year, according to a court filing from December 2024. But it said in an August report that it lost nearly $257 million in a matter of months stretching from March 13, after emerging from its first Chapter 11 bankruptcy, to the end of June. He filed for Chapter 11 bankruptcy protection again less than a month later.