Why the company filed for bankruptcy, what travelers need to know

If you’re a fan of Spirit Airlines, you may want to look for a new airline after the company filed for bankruptcy protection on Monday.

The airline listed its assets and liabilities estimated at between $1 billion and $10 billion each, according to a court filing Monday.

Spirit previously announced pilot layoffs and capacity reductions to address ongoing financial issues, as well as well-documented engine problems that have grounded many Airbus A320s across airlines. Spirit exclusively flies A320 family aircraft. It was therefore strongly impacted by these defects and was already capping its capacity as a result.

Here’s what you need to know:

Why did Spirit Airlines file for bankruptcy?

Spirit Airlines after struggling with a long string of quarterly losses, failed merger attempts and looming debt maturities.

Spirit’s problems deepened after the collapse of its planned $3.8 billion merger with JetBlue Airways in January and the impact of the RTX, Pratt & Whitney Geared Turbofan engine problem that grounded many his planes.

Spirit has reached an agreement with its bondholders that is expected to reduce total debt and provide increased financial flexibility.

The airline, under Chapter 11 bankruptcy protection, received a commitment for a $350 million equity investment from existing bondholders.

Existing bondholders will also provide $300 million in debtor-in-possession (DIP) financing, which, along with available cash, is expected to support the airline through the Chapter 11 process.

Spirit hopes to be delisted from the New York Stock Exchange in the short term.

Can I fly Spirit in bankruptcy?

Spirit said it plans to continue flight operations throughout the process and that customers can book and fly without interruption. Passengers shouldn’t immediately worry too much about their travel plans or frequent flyer miles.

“In the short term, it’s just going to be smaller,” Robert W. Mann Jr., a former airline chief executive and current president of RW Mann and Co., an independent airline consulting firm, told USA TODAY. airlines. “If you have already received notice that your flight was canceled or had to be changed, you have already received this notice.”

What happens to Spirit flights already booked?

Most, if not all, flights are expected to operate as planned in the short term.

Mann said it’s especially unlikely Thanksgiving travel will be affected, but it’s possible there could be schedule changes and cancellations later in the winter.

“It’s entirely possible that 45 days from now, which is sort of the end of the year, that we’ll have some more changes,” Mann said.

Travelers with existing Spirit reservations should look for notifications regarding any changes to their itinerary from Spirit closer to their departure date.

“Their best advice will be the one they receive from the carrier, such as time changes, reservation changes or inability to modify the reservation, cancellations. Then, of course, they are subject to the new rules (from the ministry of Transportation) on how travelers should be treated, so understanding that is probably an important thing,” Mann said.

The Department of Transportation recently finalized guidelines that require airlines to provide full refunds to passengers if their flight is canceled or delayed more than three hours on a domestic route or six hours on an international route for any reason . Travelers are only eligible for refunds if they choose not to travel on the delayed flight or an alternative route offered by the airline.

Can I transfer my Spirit miles/loyalty points to another airline?

Typically, airline loyalty points or miles are not transferable, but Mann said frequent flyer programs are valuable assets that often survive bankruptcies.

“It’s an asset, at least from the perspective of people who might acquire them. You also acquire a customer base,” he said. “This could actually be a source of funding in the future.”

It is also possible that Spirit emerges from bankruptcy through a merger. Many industry observers expect the new Trump administration to be more friendly to airlines joining forces than the Biden administration was. Under Biden, a proposed merger between Spirit and JetBlue was canceled, and Frontier Airlines also recently backed out of an offer to merge with its ultra-low-cost rival Yellow, as first reported by the Wall Street Journal. These transactions could be restarted, or another potential buyer could step in in a different regulatory environment.

If Spirit merges with another airline, it is likely that the frequent flyer program will be part of the package and combined with that of the other carrier.

Who guards Spirit’s planes?

It depends.

Spirit doesn’t already own all of its planes. For the part of its leased fleet, the lessor will retain possession and will be free to re-lease it to Spirit or another airline, depending on the offers presented.

The planes Spirit owns could be sold to raise cash during its bankruptcy, but the airline could choose to sell other assets like gates and airport slots if its executives believe the planes are more likely to generate income while remaining in service.

Does Spirit Airlines fly to Kentucky?

Yes and no. Spirit is one of the airlines that flies out of Louisville’s Muhammad Ali International Airport, but it does not fly out of Cincinnati/Northern Kentucky International Airport, according to its airline list.

Contributor: Reuters