Spirit Airlines Engages Advisers to Explore Repeat Restructuring
The budget air carrier is on shaky financial ground after its recent reorganization fell short of providing a long-term fix
Spirit Airlines is exploring strategic alternatives after its recent financial restructuring failed to put the budget carrier on a sustainable path, people familiar with the matter said.
The budget airline has brought on financial adviser PJT Partners as it navigates a cash crunch that it previously said raises doubt about its ability to continue as a going concern. It is also working with consulting firms FTI and Seabury Airline Strategy Group.
Spirit is once again on unsteady financial footing. It emerged from bankruptcy in March having eliminated $795 million in debt in a deal with bondholders, who agreed to receive equity in exchange. The bankruptcy process didn’t sufficiently resolve problems such as high lease expenses.
Spirit on Thursday announced moves to shore up its position. It borrowed the full $275 million available under its revolver. It also extended a credit-card processing agreement for two years in a deal that allows U.S. Bank National Association to hold back up to $3 million a day.
The airline has said it is exploring ways to bring in cash such as selling planes, real estate or excess gate capacity. It also has new leaders in place who have restructuring and turnaround experience, including Chief Executive Dave Davis. The company also continues to work with the law firm Davis Polk & Wardwell, which served as counsel through the recent bankruptcy.
Spirit’s emergence from bankruptcy came at a tough time for the airline industry, which has struggled much of this year with tepid domestic travel demand and a glut of seat capacity that weighed on fares. Discounters like Spirit have faced particular challenges, and Spirit has been trying to attract new customers with higher-end offerings.
In court filings last year, the airline had projected a profit of $252 million for 2025, but it has lost $256 from mid-March through the end of June.
The airline was overly optimistic on its strategic turnaround coming out of bankruptcy and ran into a more difficult environment, said Fitch Ratings analyst Joe Rohlena. Fitch downgraded Spirit last week and said the carrier is “increasingly vulnerable to a default scenario in the near term.”
Moody’s Ratings, which downgraded Spirit this week, forecast the airline will burn through more than $500 million in cash this year, violating minimum liquidity covenants by year-end.