(CNN) — Spirit Airlines, which had been in danger of going out of business due to ongoing losses and two bankruptcy filings, has reached a deal that will allow it to survive, albeit as a smaller company.
The budget airline announced Tuesday that it made an agreement with creditors that will allow it to emerge from bankruptcy later this spring or early summer.
“Spirit will emerge as a strong, leaner competitor that is positioned to profitably deliver the value American consumers expect at a price they want to pay,” CEO Dave Davis said in a statement.
Spirit, a no-frills carrier that charges very low base fares and fees for extras, filed its second bankruptcy last year. The airline has struggled to stem losses that started during the pandemic as demand shifted away from low-fare offerings toward more comfortable, experience-driven travel.
Companies often emerge from bankruptcy with lower debt and operating costs. But Spirit repeatedly warned investors in recent years that there was “substantial doubt” it would be able to stay in business.
The airline’s presence in the U.S. market is important even to passengers who never fly its planes. Spirit’s low-fare model has forced larger legacy carriers like Delta or United to offer a certain number of no-frill seats in order to compete. Thus, its closure would have likely led to higher fares across the industry.
Spirit Airlines will emerge a much smaller company than the one that first went into bankruptcy in November 2024. The airline has sold aircrafts and gates to raise cash and reduce debt, and has significantly cut staff.
This upcoming summer travel season, Spirit will offer nearly 40% fewer flights and seats than during the same period in 2024, ahead of its bankruptcy, according to data from aviation analytics firm Cirium.
Spirit will also remain an independent carrier under the terms of the deal. In the past, US airlines have been purchased out of bankruptcy and merged into other carriers. Spirit has twice agreed to be bought only for both deals to fall through.
In February 2022, Spirit agreed to merge with Frontier Airlines, another ultra-low cost carrier. But that deal fell apart when JetBlue Airways came in with a higher bid preferred by Spirit shareholders.
However, the JetBlue deal ended up being blocked by a federal judge in January 2024. The court ruled such a combination would violate federal antitrust laws and hurt airline passengers by driving up fares.
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