Spirit Airlines Bankruptcy: What Happened?

Spirit Airlines has filed for Chapter 11 bankruptcy protection for the second time in less than a year, a rare and alarming event that has sent shockwaves across the travel industry. With billions in debt and two failed restructurings, Spirit now stands as a textbook example of how operational inefficiencies, weak demand, and competitive pressure can drive a company to collapse—even after emerging from bankruptcy just months earlier.

This article breaks down what happened, why it matters, and what lessons credit and risk leaders can take away.

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Spirit Airlines Bankruptcy Timeline

• March 2025 — Spirit emerges from its first Chapter 11 filing, promising a stronger balance sheet and new operational focus.
• Q2 2025 — Reports a $246 million net loss despite restructuring, tapping its entire $275 million credit facility.
• August 29, 2025 — Files for Chapter 11 bankruptcy again, citing weak demand, failed merger attempts, and heavy lease obligations.
• September 2025 — Announces cuts to 12 cities (including Albuquerque, Oakland, and San Diego) starting October 2.
• September 2025 — Competitors like United Airlines and Frontier Airlines move quickly to seize Spirit’s market share.

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Why Spirit Filed Again

The first restructuring didn’t stick. Spirit’s second bankruptcy was triggered by:

• Weak domestic leisure travel demand — Their ultra-low-cost strategy couldn’t keep up with shifting consumer behavior.
• Failed merger strategies — Spirit’s attempted tie-ups (including JetBlue) left it exposed when regulators blocked deals.
• Debt overhang — With $2.8 billion in debt and $5 billion in aircraft lease obligations, Spirit lacked breathing room.
• Operational bloat — Costs stayed high while revenue per seat lagged competitors.

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Competitor Response: The Market Smells Blood

• United Airlines is already targeting Spirit’s strongholds—Fort Lauderdale, Orlando, and Las Vegas—with additional flights and larger aircraft.
• Frontier Airlines stock jumped 15% after the filing. Analysts upgraded Frontier to Buy, betting it will capture stranded Spirit passengers.
• Low-cost carriers overall are in the spotlight, with investors and creditors asking: who’s next?

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Lessons for Credit and Risk Leaders

This isn’t just about airlines. It’s a broader credit risk case study:

1. Watch for Repeat Filings (a.k.a. “Chapter 22”)

Companies that emerge from bankruptcy without fixing structural problems often boomerang right back. Spirit shows why second filings are even riskier—creditors have less patience, and competitors circle fast.

2. Early Signals Matter

Spirit’s continued losses, weak load factors, and reliance on credit facilities were public months before the filing. Credit teams monitoring these signals could have forecast distress and adjusted exposure earlier.

3. Industry Ripple Effects Can Create Hidden Risk

Competitor moves (like United’s expansion and Frontier’s stock surge) show how one bankruptcy reshapes entire markets. Credit teams must track second-order impacts: suppliers, airports, lessors, and travel partners all face cascading effects.

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Key Takeaways

• Two bankruptcies in 12 months = red flag. Spirit may restructure again, but survival is far from guaranteed.
• Structural cost issues beat temporary fixes. Restructuring debt doesn’t matter if operations don’t align with market demand.
• Competitor reactions create both risk and opportunity. Credit leaders should map supply chains and counterparties affected.

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FAQs

Is Spirit Airlines still flying?
Yes. During Chapter 11, Spirit continues operations—flights, ticket sales, loyalty programs, and employee pay remain active.

What happens to Spirit Airlines stock?
Shares are being delisted from NYSE American and will trade OTC. They are expected to be canceled as part of restructuring.

Will Spirit cut more routes?
Yes. Initial exits include 12 cities starting October 2, with deeper cuts possible depending on creditor negotiations.

Could Spirit file a third time?
Analysts warn it’s possible. Unless Spirit secures lender cooperation and drastically reduces costs, “Chapter 33” isn’t off the table.

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Were You Impacted?

If your company has been impacted, check out our resource guide for tips and best practices of what to do next: "My Customer Went Bankrupt—Now, What?"

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