Spirit Airlines Gets Green Light From Court To Emerge From Bankruptcy

Spirit Airlines has gained necessary approvals for its reorganization plan, enabling the Florida-based ULCC to exit Chapter 11 in the coming weeks.

Spirit filed for U.S. bankruptcy protection last November after a federal judge blocked its proposed merger with JetBlue in January 2024. The U.S. Bankruptcy Court for the Southern District of New York on Feb. 20 confirmed Spirit’s reorganization plan.

Spirit’s approval comes after the third merger attempt by Denver-based ULCC Frontier Airlines, part of a back-and-forth process between the two budget carriers that dates back to 2022 when Frontier made a run for Spirit but was usurped by JetBlue.

Frontier, in its latest offer earlier in February, held firm to 19% equity in the combined company and $400 million in takeback debt. That offer would not have required Spirit to complete a $350 million equity rights offering, the deadline for which Spirit had pushed back twice. Frontier’s updated bid also sought a waiver of the $35 million breakup fee that would otherwise be owed for terminating the equity rights offering.

That offer was rebuffed, and upon approval for its stand-alone plan, Spirit said it would “equitize $795 million of funded debt, receive $350 million of new equity investment and issue $840 million aggregate principal amount of new senior secured debt to existing bondholders upon emergence. In addition, Spirit will enter into a new revolving credit facility of up to $300 million.”

A day before Spirit said it gained approval to emerge from bankruptcy in the coming weeks, Frontier CEO Barry Biffle told attendees at the Barclays Annual Industrial Select conference, “at the end, we wish them luck. I think they’re going to end up being smaller. They almost have to be smaller in order to get their cash burn under control. And that could be good for us. Ironically, I think it’s probably bad for them over time.”

In a Feb. 20 statement, Spirit CEO Ted Christie said, “We will emerge as a stronger airline with the financial flexibility to continue providing guests with enhanced travel experiences and greater value.”