Spirit Airlines has secured a $50 million lifeline to support continued operations as it works through a critical phase of Chapter 11 bankruptcy.
The Florida-based discounter said on 15 December that it had reached an agreement with noteholders to amend its debtor-in-possession credit agreement, providing early access to $50 million of a planned $100 million funding round.
The cash infusion comes as a critical time, with speculation swirling that the ultra-low-cost carrier (ULCC) is facing an operational shutdown and potential liquidation.
Industry publication The Air Current reported last week that Spirit could stop operating over the weekend, with the critical $100 million tranche at risk of being withheld by creditors. The report cites sources from other US airlines reportedly working to backfill network gaps that could emerge if Spirit suddenly stops flying.
That fate was avoided thanks to the $50 million in funding, and Spirit has pushed back on speculation of an operational shutdown as premature.
“We continue to provide high-value travel options, which benefit American consumers whether they fly with us or not, and look forward to welcoming our guests aboard throughout this holiday season and into the future,” says Dave Davis, Spirit’s chief executive.
However, the airline still appears in dire straits. And its fate could be decided as soon as this week.
Spirit has a creditor hearing scheduled for 17 December that could prove critical for its future operations. Whether it can access the $50 million remaining in its third funding round hinges on ”further progress on a standalone plan of reorganisation or a strategic transaction”.
”Spirit is currently in active negotiations on each of these possibilities,” it says.
Spirit has acknowledged in recent months that it will be hard-pressed to continue operating for another year, and that it has engaged with other US airlines interested in potentially acquiring the ULCC.
Last week, Spirit successfully revised contracts with pilots and flight attendants, with the groups agreeing to temporary wage and benefit reductions as a cost-saving measure.
Spirit estimates the revised employment terms, which have union support, will save it about $100 million annually.
Meanwhile, the airline has been enacting dramatic network- and fleet-reduction measures. It has exited 14 US markets and plans to cut its fleet at least in half by returning dozens of Airbus A320-family aircraft to lessors.
Spirit has posted losses in 14 of the past 15 quarters, according to Airline Business data, including a $317 million loss in the third quarter.
