Jan 5, 2025, 12:00 AM
Jan 5, 2025, 12:00 AM

Spirit Airlines plunges into crisis after losing over $2 billion

Highlights
  • Since 2019, Spirit Airlines has not turned a profit, losing over $2 billion since 2020.
  • The airline's difficulties included pandemic-related disruptions, engine recalls, and strong competition.
  • As a result, Spirit filed for Chapter 11 bankruptcy protection, expecting to operate normally while restructuring.
Story

In the United States, Spirit Airlines has faced significant financial challenges over recent years, culminating in its filing for Chapter 11 bankruptcy protection on November 18, 2023. The budget airline has not been profitable since 2019 and has lost more than $2 billion since the onset of the Covid-19 pandemic in 2020. Initially, the pandemic had severely impacted the airline industry, leading to a sharp decline in travel demand that Spirit has struggled to recover from. As travel began to pick up post-pandemic, Spirit Airlines continued to experience unique hardships, including high supply chain issues and rising operational costs, which particularly affected payroll expenses for its thousands of employees. Additionally, the airline has been hit hard by a recall of Pratt & Whitney engines that left several of its jets grounded, further complicating its recovery efforts. Sales have lagged, and the unsuccessful merger attempt with JetBlue Airways showcased underlying weaknesses in Spirit's business strategy. Competitively, budget airlines have battled against legacies like American, Delta, and United, which have adopted their own low-cost fare options and enhanced customer offerings. Such changes in consumer preferences towards more comfortable travel experiences have put even more pressure on ultra-low-cost carriers like Spirit. In light of these challenges, Spirit Airlines has had to make tough decisions, including furloughing pilots and incentivizing staff with buyouts. The airline also began downsizing its operations by selling some of its Airbus fleet and reducing its flight routes. As part of its restructuring during bankruptcy, Spirit Airlines plans to continue operating normally while aiming to emerge from these proceedings smaller and more streamlined, with expectations of exiting bankruptcy by the first quarter of 2025.

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