Spirit Airlines could be headed towards a liquidation as surging fuel costs caused by the Iran war are pressuring the company’s finances, Bloomberg reported Wednesday night. The airline has been operating while navigating the Chapter 11 bankruptcy process, but could make the decision to liquidate as soon as this week, per Bloomberg.¹

Spirit filed for bankruptcy last August, its second time doing so in under a year, after exiting its first bankruptcy restructuring months earlier in March. Spirit had reached a deal with its creditors to cut costs and eliminate billions in dollars of debt and said last month that it expected to exit the Chapter 11 process this summer.²

Spirit Airlines did not immediately respond to a request for comment on the report.

Spirit’s troubles before its first bankruptcy included a failed merger with JetBlue (JBLU) that was called off in March 2024 after a judge blocked it on antitrust grounds. Spirit also rejected offers from fellow discount airline Frontier Group (ULCC) while undergoing its first bankruptcy process last year.

Frontier shares surged Thursday morning on the news of Spirit’s potential liquidation, rising more than 7% to a six-week high.

The surge in fuel prices resulting from the Iran war has prompted airlines across the industry to raise ticket prices and fees recently. Travel demand has remained strong, but higher fuel costs weigh on the profit margins of airlines.

Credits: Spirit Airlines

The post Spirit Airlines Was Set To Exit Bankruptcy This Summer. Now High Fuel Prices Could Force It To Liquidate. first appeared on AircrewNews.com.

In a fleet optimization move, Spirit Airlines will reject its commitment to buy 52 Airbus planes along with its options for 10 others. The aircraft orders will be taken over by aircraft lessor AerCap .

This three-way agreement is part of a dispute settlement between Spirit and AerCap, which was approved on Friday by U.S. Bankruptcy Court for the Southern District of New York.

The conflict with the world’s largest aircraft leasing company was the trigger for pushing Spirit into its second bankruptcy.

In late August, AerCap unexpectedly terminated the lease agreements for 36 new Airbus A320neo family jets that were scheduled for delivery to Spirit between 2027 and 2028. It also claimed default on the leases for 37 aircraft already in the carrier’s operational fleet.

Spirit disputed the validity of AerCap’s claims. But with access to a large portion of its current and future fleet jeopardized, the company was forced to seek bankruptcy protection.

As part of the settlement between the two companies, Spirit will reject 27 out of the 37 leases it holds. AerCap, meanwhile, was granted permission to keep and use $9.7 million in cash security deposits that Spirit provided for the canceled aircraft leases.

The Irish leasing giant also has been granted permission to file a total unsecured claim of up to $572 million against Spirit. It is not clear yet how much it will be able to collect on that claim.

Spirit will give up all its rights to the 36 undelivered jets. Additionally, it will sign new lease agreements with AerCap for 30 new Airbus A320 or A321 airplanes for deliveries spread equally across 2027, 2028 and 2029.

As part of the deal, AerCap will make a cash injection of $150 million into the bankrupt airline.

Separately, Spirit said the court has also approved a debtor-in-possession (“DIP”) financing facility of up to $475 million from its existing bondholders. Of the total financing, $200 million is immediately available to the carrier.

In a statement, Spirit said the agreement allows it to reduce operating costs by hundreds of millions of dollars.

Spirit plans to shrink its operations to reduce its costs. It has decided to furlough approximately 1,800 flight attendants, about one-third of its cabin crew, effective December 1.

The carrier, which currently operates 214 aircraft, also plans to shrink its fleet by nearly 100 aircraft, nearly half of its fleet.

Credits: Spirit Airlines

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