Spir­it Air­lines said Mon­day that it has filed for bank­rupt­cy pro­tec­tion and will at­tempt to re­boot as it strug­gles to re­cov­er from the pan­dem­ic-caused swoon in trav­el and a failed at­tempt to sell the air­line to Jet­Blue.

Spir­it, the biggest U.S. bud­get air­line, has lost more than $2.5 bil­lion since the start of 2020 and faces loom­ing debt pay­ments to­tal­ing more than $1 bil­lion over the next year.

Spir­it said it ex­pects to op­er­ate as nor­mal as it works its way through a pre­arranged Chap­ter 11 bank­rupt­cy process and that cus­tomers can con­tin­ue to book and fly with­out in­ter­rup­tion.

Shares of Mi­ra­mar, Flori­da-based Spir­it dropped 25% on Fri­day, af­ter The Wall Street Jour­nal re­port­ed that the air­line was dis­cussing terms of a pos­si­ble bank­rupt­cy fil­ing with its bond­hold­ers. It was just the lat­est in a se­ries of blows that have sent the stock crash­ing down by 97% since late 2018 — when Spir­it was still mak­ing mon­ey.

CEO Ted Christie con­firmed in Au­gust that Spir­it was talk­ing to ad­vis­ers of its bond­hold­ers about the up­com­ing debt ma­tu­ri­ties. He called the dis­cus­sions a pri­or­i­ty, and said the air­line was try­ing to get the best deal it could as quick­ly as pos­si­ble.

“The chat­ter in the mar­ket about Spir­it is no­table, but we are not dis­tract­ed,” he told in­vestors dur­ing an earn­ings call. “We are fo­cused on re­fi­nanc­ing our debt, im­prov­ing our over­all liq­uid­i­ty po­si­tion, de­ploy­ing our new reimag­ined prod­uct in­to the mar­ket, and grow­ing our loy­al­ty pro­grams.”

Peo­ple are still fly­ing on Spir­it Air­lines. They’re just not pay­ing as much.

In the first six months of this year, Spir­it pas­sen­gers flew 2% more than they did in the same pe­ri­od last year. How­ev­er, they are pay­ing 10% less per mile, and rev­enue per mile from fares is down near­ly 20%, con­tribut­ing to Spir­it’s red ink.

It’s not a new trend. Spir­it failed to re­turn to prof­itabil­i­ty when the coro­n­avirus pan­dem­ic eased and trav­el re­bound­ed. There are sev­er­al rea­sons be­hind the slump.

Spir­it’s costs, es­pe­cial­ly for la­bor, have risen. The biggest U.S. air­lines have snagged some of Spir­it’s bud­get-con­scious cus­tomers by of­fer­ing their own brand of bare-bones tick­ets. And fares for U.S. leisure trav­el — Spir­it’s core busi­ness — have sagged be­cause of a glut of new flights.

The pre­mi­um end of the air-trav­el mar­ket has surged while Spir­it’s tra­di­tion­al no-frills end has stag­nat­ed. So this sum­mer, Spir­it de­cid­ed to sell bun­dled fares that in­clude a big­ger seat, pri­or­i­ty board­ing, free bags, in­ter­net ser­vice and snacks and drinks. That is a huge change from Spir­it’s long­time strat­e­gy of lur­ing cus­tomers with rock-bot­tom fares and forc­ing them to pay ex­tra for things such as bring­ing a car­ry-on bag or or­der­ing a so­da.

In a high­ly un­usu­al move, Spir­it plans to cut its Oc­to­ber-through-De­cem­ber sched­ule by near­ly 20%, com­pared with the same pe­ri­od last year, which an­a­lysts say should help prop up fares. But that will help ri­vals more than it will boost Spir­it. An­a­lysts from Deutsche Bank and Ray­mond James say that Fron­tier, Jet­Blue and South­west would ben­e­fit the most be­cause of their over­lap with Spir­it on many routes.

Spir­it has al­so been plagued by re­quired re­pairs to Pratt & Whit­ney en­gines, which is forc­ing the air­line to ground dozens of its Air­bus jets. Spir­it has cit­ed the re­call as it fur­loughed pi­lots.

The air­craft fleet is rel­a­tive­ly young, which has made Spir­it an at­trac­tive takeover tar­get.

Fron­tier Air­lines tried to merge with Spir­it in 2022 but was out­bid by Jet­Blue. How­ev­er, the Jus­tice De­part­ment sued to block the $3.8 bil­lion deal, say­ing it would dri­ve up prices for Spir­it cus­tomers who de­pend on low fares, and a fed­er­al judge agreed in Jan­u­ary. Jet­Blue and Spir­it dropped their merg­er two months lat­er.

U.S. air­line bank­rupt­cies were com­mon in the 1990s and 2000s, as air­lines strug­gled with fierce com­pe­ti­tion, high la­bor costs and sud­den spikes in the price of jet fu­el. PanAm, TWA, North­west, Con­ti­nen­tal, Unit­ed and Delta were swept up. Some liq­ui­dat­ed, while oth­ers used fa­vor­able laws to rene­go­ti­ate debts such as air­craft leas­es and keep fly­ing.

The last bank­rupt­cy by a ma­jor U.S. car­ri­er end­ed when Amer­i­can Air­lines emerged from Chap­ter 11 pro­tec­tion and si­mul­ta­ne­ous­ly merged with US Air­ways in De­cem­ber 2013.

By  DAVID KOENIG

by Taboola