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Breaking the news just hours ago, CNBC News learned from anonymous sources within Spirit Airlines that the low-cost carrier is on the verge of another financial collapse. The path to recovery for one of America’s few remaining budget carriers has been rough and is apparently regressing yet again. Now, Spirit is reportedly facing the risk of liquidation rather than a third bankruptcy filing.
The airline’s financial troubles have been compounded by several factors. Ongoing engine problems led to a Pratt & Whitney recall that grounded many of Spirit’s Airbus jets in 2023. Spirit was targeting to bring in a profit of $252 million last year, but it also reported losing $257 million after the first time it filed for bankruptcy, leaving virtually zero room to fall short of its goal.
Three Times Unlucky For America’s Budget Carrier
Spirit Airlines filed for Chapter 11 bankruptcy in November 2024, citing annual losses of more than $1.2 billion. The initial insolvency filing followed the failure of a planned merger with JetBlue which was blocked earlier in 2024 by a federal judge on antitrust grounds. Recovery after that was made more challenging by soft demand for domestic leisure travel. Unable to make a profit, the airline filed for a second Chapter 11 bankruptcy on August 29, 2025.
Spirit did negotiate an agreement to exit its second Chapter 11 bankruptcy in the summer of 2025 but the ultra-low-cost carrier’s cash flow still strained. The airline introduced new premium airfare choices like “Big Front Seats” and premium featuring more legroom and other perks. This, unfortunately, wasn’t enough, and sharp increases in fuel costs have undermined the airline’s cash-flow assumptions.
Allegedly, lenders funding its credit line now doubt the current reorganization plan will succeed. The blame for low profits is being largely placed on the recent surge in jet fuel prices prompted by US President Trump’s attack on Iran. The civil aviation sector has been hit hard by rising oil prices caused by Operation Epic Fury. Creditors are reportedly exploring whether the company is still viable or if its assets should be sold off. NBC News relayed this simple response from Spirit:
“We don’t comment on market rumors and speculation.”
The Downward Spiral Of Spirit Airlines
As Spirit flails and Southwest Airlines has moved toward a more conventional business model, large carriers have introduced their own budget airfare options. Meanwhile, budget rival Frontier Airlines has expanded capacity, putting more pressure on Spirit’s domestic-focused business model. Despite these challenges, Spirit has recently received praise for affordability and reliability as management continues to adjust the restructuring plan to save its business.
|
Date |
Event |
|---|---|
|
Jan 2024 |
JetBlue Merger Blocked |
|
Nov 2024 |
First Chapter 11 Filing |
|
Mar 2025 |
Bankruptcy Exit |
|
Aug 2025 |
Second Chapter 11 Filing |
|
Jan 2026 |
Engine Groundings Peak |
|
Mar 2026 |
Fuel Spike Following Operation Epic Fury |
|
Apr 16, 2026 |
Liquidation Threat |
The P&W Geared Turbofan engine recall grounded a massive number of aircraft worldwide, keeping them out of service for several months. Spirit was also hit by a drop in revenue per seat while it suffered an increase in operating expenses as the mechanical crisis unfolded. The lower profit margin from higher costs for employee benefits, wages, and aircraft rent compounded the inability to produce revenue as the airline lost aircraft.
Spirit Slashes Fleet To 80 Planes: Can It Survive The Iran War Fuel Crisis?
The carrier significantly outperformed analyst expectations.
How Spirit Has Kept Flying
Despite the popular misunderstanding that declaring bankruptcy implies shutting down, US law allows businesses like Spirit to continue operations while they seek a solution. Under Chapter 11, Spirit is protected by an automatic stay, which prevents most creditor activity while the bankruptcy court watches the case. That allowed Spirit to continue operating as a “debtor in possession.”
The debtor is allowed a 120-day initial exclusive window to submit a plan for restructuring or liquidation. According to Sheppard Mullin, the court regularly extends the 180-day period for securing creditor relief. In the event that Spirit Airlines fails, the court has two options: dismiss the lawsuit or convert it to a Chapter 7 liquidation, allowing creditors to propose their own plan.
