US no-frills pioneer Spirit Airlines files for bankruptcy protection
Recasts first two paragraphs, adds context and updates stock prices in paragraphs 4, 8
Airline has deal with bondholders to restructure debts
Expects to exit bankruptcy process in Q1 2025
Carrier expects to operate as normal through the process
By Shivansh Tiwary, Rajesh Kumar Singh
Nov 18 (Reuters) -Spirit Airlines SAVE.N has filed for bankruptcy protection, the no-frills U.S. travel pioneer said on Monday, after strugglingwith years oflosses, failed merger attempts and heavy debt levels.
It is the first major U.S. airline to file for Chapter 11 in more than a decade, after a proposed$3.8 billion merger with JetBlue Airways JBLU.O collapsed in January.
The Florida-based airline said it had pre-arranged a deal with its bondholders to restructure its debts and raise money to help it operate during the bankruptcy process, which it expects to exit in the first quarter of 2025.
Intense competition among U.S. carriers for price-sensitive leisure travelers as well as an oversupply of airline seats in the domestic market hit Spirit's pricing power. Its average fare per passenger was down 19% on a year-on-year basis in the first half of this year from a year earlier.
The carrier said it expected to continue operating its business as normal through the proceedings and customers could book and fly without interruption.
The Chapter 11 process will not impact wages or benefits of its employees, it said. Its vendors and aircraft lessors will also continue to be paid and will not be impaired, it added.
The company said it expected to be delisted from the New York Stock Exchange in the near term, and that itsshares would be canceled and have no value as part of the restructuring.
Spirit's shares, which have plunged more than 90% this year, were halted on Monday. Shares of rival low-cost carriers Frontier Airlines ULCC.O and JetBlue fell 14% and 6%, respectively.
PROFIT STRUGGLE
Spirit, known for its bright yellow livery, is the first major U.S. airline to file for Chapter 11 since 2011.
It has beenamong the airlines most heavily affected by issues with RTX's RTX.N Pratt & Whitney Geared Turbofan engines, which have forced it to ground multiple aircraft and driven up costs.
Spirit has not posted a full-year profit since 2019. It lost about $360 million in the first half of this year despite strong travel demand.
Analysts say a merger with JetBlue would have thrown a lifeline to the company. However, a Boston judge blocked the deal on the grounds it would reduce competition, raising doubts about the company's ability to manage looming debt maturities.
Spirit has been shrinking its operations as part of its efforts to cut costs and shore up its finances. It has furloughed hundreds of pilots and delayed aircraft deliveries. It is also selling its planes to boost liquidity.
'COMPREHENSIVE' RESTRUCTURING
Spirit filed for Chapter 11 protection in New York. The airline said a "comprehensive balance sheet restructuring" was expected to reduce total debt, provide increased financial flexibility, position it for long-term success, and accelerate investments.
As part of the restructuring agreement, the company has received commitments for a $350 million equity investment from existing bondholders. It plans to reduce its debt load by $795 million via a debt/equity swap transaction.
Existing bondholders will also provide $300 million in debtor-in-possession financing, which, together with available cash, is expected to support the airline through the Chapter 11 process.
Spirit's flight attendants union said the bankruptcy filing does not change pay, benefits or working conditions for its members. It told flight attendants to continue to work as planned.
HUMBLE BEGINNINGS
The company started out as a long-haul trucking company in 1964 before shifting to aviation around 1983. It offered leisure packages to popular destinations under the name Charter One Airlines and rebranded to Spirit in 1992.
The discount carrier became popular with budget-conscious customers willing to forgo amenities like checked bags and seat assignments.
Ultra-low-cost carriers, which excelled at keeping their expenses low and offering affordable, no-frills travel, have struggled since the COVID pandemicas some travelers prefer to pay extra for a more comfortable journey as they pursue experiences.
Spirit's troubles, along with those at some of rival budget carriers, have spurred talk among some Wall Street analystsof a flawed business model.
Graphic-Spirit shares have lagged all major airlines in past 12 months https://reut.rs/4fwjt65
Reporting by Rajesh Kumar Singh in Chicago and Shivansh Tiwary in Bengaluru; Editing by Sriraj Kalluvila, Mark Potter, Nick Zieminski and Paul Simao
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