Spirit Airlines: S.D.N.Y. Case 24-11988 Chapter 22 Reorganization

Spirit Airlines, the Miramar, Florida-based ultra-low-cost carrier that pioneered the unbundled fare model in American aviation and grew to become the nation's largest ULCC, filed for chapter 11 bankruptcy on November 18, 2024, in the U.S. Bankruptcy Court for the Southern District of New York (Case No. 24-11988)—marking the largest U.S. airline failure since American Airlines in 2011. The filing came ten months after the Department of Justice blocked Spirit's $3.8 billion merger with JetBlue, eliminating what management had viewed as the company's primary strategic alternative for addressing approximately $3.3 billion of debt.

Spirit's first chapter 11 case proceeded as a prepackaged restructuring, converting approximately $795 million of debt to equity and enabling emergence in 114 days. Five months later, in August 2025, the company returned to bankruptcy court under Case No. 25-11621 after AerCap Holdings terminated aircraft leases. The second case includes fleet reductions from 214 aircraft to approximately 100, an examiner appointment, and ongoing negotiations with aircraft lessors in a market where legacy carriers offer basic economy products.

Company Background and the Ultra-Low-Cost Model

From Trucking Company to Aviation Pioneer.

Spirit Airlines' origins trace back to 1980 when the company was founded as Clippert Trucking Company. The business transitioned to passenger airline service in 1992. Headquartered in Dania Beach, Florida, Spirit developed and refined the ultra-low-cost carrier model.

Spirit's business model centered on unbundled pricing—offering low base fares while charging separately for services that traditional carriers included, such as carry-on bags, seat selection, water, and snacks. This approach enabled Spirit to advertise the lowest fares in the market while generating ancillary revenue. At its peak, Spirit became the largest ultra-low-cost carrier in the United States, operating an all-Airbus fleet of A320 family aircraft across domestic routes and international destinations throughout the Caribbean and Latin America. The company employed approximately 9,000 workers and its shares traded on the New York Stock Exchange under ticker SAVE before delisting following the bankruptcy filing.

Corporate structure and affiliates. Spirit's jointly administered bankruptcy cases included multiple debtor entities, most notably Spirit Finance Cayman 1 Ltd., an offshore aircraft financing entity used in fleet operations. Aircraft lessors including AerCap Holdings, Carlyle Aviation Management, Keystone 9 Limited, and FUYO held significant claims.

The ULCC Value Proposition Under Pressure.

The ultra-low-cost carrier model that Spirit pioneered faced challenges in the years preceding bankruptcy. The value proposition depended on maintaining a significant fare differential with legacy carriers, but that differential narrowed as major airlines introduced basic economy products with stripped-down services at price points approaching ULCC fares. Delta, United, and American each rolled out no-frills fare categories that competed directly with Spirit's core offering while leveraging loyalty programs, broader route networks, and more modern aircraft.

Simultaneously, Spirit's cost advantage eroded as fuel and labor costs increased faster than ticket prices could be raised. Industry-wide pilot contract improvements following the pandemic increased labor costs. Spirit negotiated new contracts with flight attendant and pilot unions, and the improved terms compressed margins as revenue pressures mounted. By the time of bankruptcy, Spirit's cost advantage had narrowed relative to larger carriers that could offset higher costs through scale efficiencies and premium product revenue.

Failed Merger Attempts

Spirit's path to bankruptcy was shaped by two failed attempts to combine with other carriers.

Frontier Airlines Bid (2022).

In February 2022, Frontier Airlines agreed to acquire Spirit for $2.9 billion in a transaction that would have created the fifth-largest U.S. carrier. Spirit's board initially supported the Frontier transaction.

However, JetBlue Airways intervened with a competing offer that Spirit's board ultimately found more compelling despite regulatory concerns. Frontier withdrew from the bidding war after repeatedly increasing its offer failed to secure shareholder support. The Frontier merger did not close.

JetBlue Airways Acquisition (2022-2024).

JetBlue's $3.8 billion offer to acquire Spirit promised shareholders a substantial premium while potentially expanding JetBlue's network and aircraft fleet. Spirit's board accepted the JetBlue proposal, triggering regulatory review that ended without approval.

In March 2023, the Department of Justice filed suit to block the merger on antitrust grounds. The DOJ's complaint argued the combination would reduce competition in the budget airline sector, specifically targeting Spirit's role as a "disruptive competitor" that had historically lowered industry fares through pricing.

A federal judge blocked the acquisition in January 2024, finding the merger would harm competition in budget air travel. The ruling accepted the DOJ's argument that eliminating Spirit as an independent ULCC would reduce consumer choices and potentially increase fares. The merger agreement was terminated in March 2024.

Antitrust and timing. The DOJ challenged the transaction on antitrust grounds. Within eight months of the blocked merger, Spirit filed for bankruptcy—and within eighteen months, filed again.

The Path to Bankruptcy

Cumulative Losses Exceeding $2.5 Billion.

Spirit's financial deterioration preceded the blocked merger by years. From 2020 through 2024, the company accumulated approximately $2.5 billion in losses, with losses reported in every quarter following the COVID-19 pandemic. While travel demand recovered to pre-pandemic levels, Spirit's revenue failed to return to pre-pandemic levels.

Spirit's Q3 2024 financial results disclosed going concern warnings ahead of the bankruptcy filing. Revenue per available seat mile (RASM) declined year-over-year even as competitors reported improved unit economics. The quarterly losses depleted liquidity reserves, leaving Spirit with limited flexibility to address near-term debt maturities.

Pratt & Whitney Engine Crisis.

Compounding the financial challenges, Spirit faced operational disruptions from Pratt & Whitney GTF engine inspections that required grounding aircraft. The issue—affecting Pratt & Whitney's geared turbofan engines powering Airbus A320neo family aircraft—impacted approximately 25 A320neos in 2024, creating capacity constraints. With fewer operational aircraft, Spirit could generate less revenue while still carrying fixed costs for grounded planes. The engine issues also increased maintenance costs, further pressuring margins.

The groundings forced Spirit to reduce frequencies and exit certain markets.

Liquidity Constraints and Creditor Negotiations.

By October 2024, Spirit's liquidity position had tightened. The company faced significant near-term debt maturities and lease obligations that strained cash reserves. Pre-bankruptcy creditor negotiations began, with bondholders holding over $1 billion in debt participating in discussions about restructuring alternatives.

The negotiations focused on debt-to-equity conversion terms that would enable Spirit to continue operating while addressing its capital structure. By November 2024, Spirit had secured commitments for $350 million in new equity financing and agreement from bondholders to convert debt—enabling a prepackaged chapter 11 filing.

First Chapter 11 Case (November 2024 – March 2025)

Prepackaged Restructuring Strategy.

Spirit's first bankruptcy was structured as a prepackaged case with the plan and disclosure statement filed within days of the petition. The company entered into a restructuring support agreement (RSA) before filing, supported by holders of over 75% of senior secured notes.

The First Day Declaration filed by Fred Cromer outlined the causes of Spirit's distress: the failed JetBlue merger, fleet and operational challenges including engine groundings, competitive pressures from legacy carrier basic economy products, and the resulting liquidity constraints. The declaration established the foundation for DIP financing approval and the restructuring timeline.

Section 1110: The Central Issue.

Section 1110 of the Bankruptcy Code governs aircraft equipment in airline bankruptcies, providing lessors with powerful protections not available to other creditors. Aircraft lessors can demand that debtors cure defaults and perform lease obligations within 60 days of filing—or return the equipment. This provision gives aircraft lessors substantial leverage in airline restructurings.

Spirit's Section 1110 Order (Dkt. 256), entered on December 18, 2024, became the most-referenced document in the first case with 31 cross-references in subsequent filings. The order authorized agreements with aircraft lessors that allowed Spirit to retain fleet aircraft while satisfying the statutory requirements. Negotiating Section 1110 arrangements was central to fleet continuity.

Plan Treatment and Bondholder Takeover.

The confirmed plan converted approximately $795 million in senior secured notes to equity. Bondholders became majority equity owners of the reorganized company, with a new board of directors appointed representing bondholder interests. Unsecured creditors received distributions under the confirmed plan.

Existing shareholders were wiped out. Spirit's stock was delisted from the New York Stock Exchange following the filing, ending the company's status as a publicly traded entity.

First Case Timeline.

Spirit emerged from its first chapter 11 case on March 12, 2025, with a substantially de-leveraged balance sheet. The 114-day bankruptcy was considered expedited for an airline restructuring, enabled by the prepackaged nature of the filing and bondholder support for the plan.

First Case Professionals.

Post-Emergence Challenges

CEO Departure.

In April 2025—approximately one month after emergence—CEO Ted Christie announced his resignation. Christie had served as CEO since 2019, guiding Spirit through the pandemic crisis, failed merger attempts, and first bankruptcy. His departure during the post-emergence period added uncertainty as the company attempted to execute its restructured business plan.

Operational Struggles.

Spirit faced operational challenges immediately following bankruptcy emergence. The airline struggled with pilot scheduling and aircraft maintenance issues that disrupted service reliability. Customer complaints increased during the restructuring period.

The operational issues increased costs through irregular operations and customer compensation.

Network Contraction and Fleet Reduction.

Following emergence, Spirit reduced service to multiple airports and exited several secondary markets. The airline's focus shifted to higher-yield routes from its Florida bases, concentrating operations where the company believed it could compete most effectively.

Spirit also cancelled outstanding Airbus aircraft orders, including orders for A320neo family aircraft that would have supported fleet growth. The cancellations reduced Spirit's fleet growth commitments.

Second Chapter 11 Case (August 2025 – Present)

AerCap Lease Terminations.

In July 2025, AerCap Holdings—Spirit's largest aircraft lessor—terminated aircraft leases with the carrier. The termination affected a significant portion of Spirit's Airbus A320 fleet.

Aircraft lessors can repossess aircraft, making lease negotiations central to airline restructurings.

Second Filing.

Spirit filed for chapter 11 protection a second time on August 29, 2025, five months after emerging from its first bankruptcy. The second case is supported by a $475 million DIP facility and a plan to shrink the fleet from 214 aircraft to about 100.

DIP Financing and Fleet Rationalization.

Spirit secured $475 million in debtor-in-possession financing for the second case, with the DIP facility provided by existing creditors. The financing included milestones for fleet rationalization, tying funding availability to Spirit's progress in reducing its aircraft count to sustainable levels.

The second case DIP was smaller than typically required for an airline of Spirit's size.

Fleet Reduction.

The second bankruptcy contemplates reducing Spirit's fleet from 214 aircraft to approximately 100, a reduction of more than half. The plan focuses on returning older Airbus A319 and A320 aircraft to lessors through lease rejections and negotiated terminations. The fleet reduction represents a restructuring of Spirit's network.

Workforce Impact.

Spirit announced plans to furlough approximately 1,800 flight attendants as part of second-case cost-cutting measures. The furloughs represented a significant portion of Spirit's cabin crew workforce, with the airline's workforce already reduced following the first restructuring. Combined with pilot reductions and corporate staff cuts, Spirit's workforce has contracted from the approximately 9,000 employed at the time of the first filing.

Examiner Appointment.

On December 1, 2025, an examiner appointment application was filed. Glenn Agre Bergman & Fuentes LLP was retained as examiner counsel, with M3 Advisory Partners serving as the examiner's financial advisor.

Aircraft Lessor Negotiations.

The second case has involved negotiations with multiple aircraft lessors:

The court-approved Carlyle Aviation restructuring term sheet addresses a portion of Spirit's fleet. Lessor negotiations remain ongoing, with exclusivity extensions granted through December 2025 (Dkt. 575) and lease rejection deadlines extended (Dkt. 574) to allow continued negotiations.

Second Case Status.

As of January 2026, Spirit's second chapter 11 case remains pending with no confirmed plan. A potential sale process has been contemplated. Bidding procedures have been established (Dkt. 135).

Second Case Professionals.

Industry Context: The ULCC Model

Competitive Pressures Reshaping Budget Aviation.

Spirit's struggles reflect broader challenges facing ultra-low-cost carriers. The sector's value proposition—lower fares in exchange for stripped-down service—depended on maintaining a substantial pricing gap with legacy carriers. That gap has narrowed as Delta, United, and American introduced basic economy products competing directly on price for budget-conscious travelers.

The legacy carrier basic economy offerings provide comparable base fares with access to broader networks, frequent flyer programs, and more modern aircraft.

Cost Structure Challenges.

Fuel and labor costs increased faster than ticket prices throughout the post-pandemic period, compressing margins industry-wide. Spirit's cost advantage eroded as pilot wages increased across the industry and fuel prices remained elevated.

The ULCC model depends on achieving lower unit costs than competitors. When that cost advantage narrows, the pricing advantage narrows correspondingly.

Competitive Landscape Shifts.

Frontier and other budget carriers saw increased bookings following Spirit's first bankruptcy filing, absorbing traffic from customers concerned about Spirit's stability. Legacy carriers added capacity on routes Spirit served. Analysts predicted consolidation in the ULCC sector, viewing Spirit's distress as indicative of structural challenges rather than company-specific failures.

Customer and Stakeholder Impact

Operations During Bankruptcy.

Spirit continued selling tickets throughout its chapter 11 proceedings, with the airline honoring existing bookings and maintaining customer refund policies. Continued operations preserved going-concern value.

The Free Spirit loyalty program continued operating during bankruptcy, with miles remaining valid. Spirit emphasized to customers that flights would continue.

Credit Card and Loyalty Programs.

Spirit's co-branded credit card program faced uncertainty during bankruptcy, as such programs represent important revenue streams for airlines. Credit card partnerships typically involve advance payments from banks in exchange for future miles—arrangements that create complex claims in bankruptcy. Spirit's program continued during the first case and through emergence.

Case Timeline

Frequently Asked Questions

When did Spirit Airlines file for bankruptcy?

Spirit Airlines filed for chapter 11 bankruptcy twice: first on November 18, 2024, and again on August 29, 2025. The second filing came approximately five months after emergence from the first case.

Why did Spirit file for bankruptcy?

The primary catalyst was the DOJ's successful blocking of Spirit's $3.8 billion merger with JetBlue in January 2024, eliminating the company's primary strategic alternative. Spirit also accumulated $2.5 billion in losses from 2020-2024, faced Pratt & Whitney engine issues that grounded 20% of its neo fleet, and experienced margin compression from legacy carrier competition through basic economy products.

What happened in Spirit's first bankruptcy?

Spirit's first case was a prepackaged restructuring that converted $795 million of senior secured debt to equity. The case lasted 114 days, with confirmation on February 20, 2025, and emergence on March 12, 2025. Bondholders became majority equity owners while existing shareholders were wiped out.

Why did Spirit file for bankruptcy a second time?

AerCap Holdings, Spirit's largest aircraft lessor, terminated aircraft leases in July 2025, precipitating the second filing.

What is Spirit's fleet plan in the second bankruptcy?

Spirit plans to reduce its fleet from 214 aircraft to approximately 100, focusing on returning older Airbus A319 and A320 aircraft to lessors through lease rejections and negotiated terminations.

How many employees were affected?

Spirit employed approximately 9,000 people at the first filing. The airline announced 1,800 flight attendant furloughs during the second bankruptcy, with overall workforce reductions continuing as operations contract.

What is a "chapter 22" case?

"Chapter 22" is bankruptcy practitioners' informal term for a company filing chapter 11 twice in a short period.

Was an examiner appointed?

Yes, an examiner appointment application was filed on December 1, 2025, in the second case. Glenn Agre Bergman & Fuentes LLP serves as examiner counsel with M3 Advisory Partners as financial advisor.

What happened to Spirit's stock?

Spirit's common stock was delisted from the NYSE following the first bankruptcy filing. Existing shareholders were wiped out under the first restructuring plan, with bondholders becoming the new equity owners of the reorganized company.

What does Spirit's failure mean for the ULCC industry?

Spirit's struggles reflect broader challenges facing ultra-low-cost carriers, including margin compression from legacy carrier basic economy products, rising labor and fuel costs, and reduced fare differentials.

For comprehensive coverage of aviation and airline bankruptcies, visit the ElevenFlo bankruptcy blog.