Spirit Airlines files for bankruptcy as financial losses pile up and debt payments loom

Core Viewpoint - Spirit Airlines has filed for bankruptcy protection as it attempts to recover from significant financial losses and a failed merger attempt with JetBlue, while continuing to operate normally during the Chapter 11 process [1][3]. Financial Performance - Since the start of 2020, Spirit Airlines has incurred losses exceeding $2.5 billion and faces over$1 billion in debt payments due within the next year [1][4]. - In the first half of this year, Spirit's passenger numbers increased by 2% compared to the same period last year, but revenue per mile from fares decreased by nearly 20%, indicating a decline in profitability [5][6]. Market Position and Strategy - The airline's traditional low-cost model has been challenged by rising labor costs and competition from larger airlines offering similar budget options [5][6]. - Spirit has shifted its strategy to include bundled fares that offer additional services, a departure from its previous model of low base fares with extra charges for services [7][8]. Operational Adjustments - Spirit plans to reduce its flight schedule by nearly 20% from October to December compared to the previous year, a move analysts suggest may benefit competitors more than Spirit itself [8]. - The airline has faced operational challenges due to required repairs on Pratt & Whitney engines, leading to the grounding of several Airbus jets and subsequent pilot furloughs [12]. Competitive Landscape - Analysts predict that competitors such as Frontier, JetBlue, and Southwest will benefit from Spirit's struggles, particularly due to route overlaps [12]. - The failed merger attempts with JetBlue and Frontier highlight the competitive pressures within the airline industry, with regulatory challenges impacting consolidation efforts [15].