According to people familiar with the situation, Spirit Airlines has begun looking for strategic alternatives after its bankruptcy restructuring failed to stabilize the low-cost carrier. The airline brought in consulting firms FTI and Seabury Airline Strategy Group, and hired financial adviser PJT Partners to help manage a worsening cash crunch.
By paying off $795 million in debt through a deal that gave bondholders equity in return, Spirit was able to emerge from bankruptcy in March. However, significant problems, such as costly aircraft leases, remained unresolved during the process. There are now fresh concerns regarding Spirit’s capacity to operate as a going concern.
Spirit Airlines to restructure their finances
On Thursday, the airline took action to improve its financial situation. It took out a full $275 million loan from its revolving credit line. Additionally, it signed a two-year extension to its credit-card processing agreement, which permits U.S. Bank National Association to withhold up to $3 million daily. Spirit is still looking into ways to raise money, such as selling real estate, airplanes, or extra gate space.
Since the bankruptcy exit, management has changed. Dave Davis, the new CEO, and other senior executives contribute their experience in turnaround and restructuring. Spirit is still in business with Davis Polk & Wardwell, the legal firm that provided bankruptcy advice to the company.
Spirit’s problems have been made worse by industry conditions. Through 2025, demand for domestic air travel has remained low, and market-wide fares have been pushed by excess seat capacity. Spirit and other discount stores have been particularly hard hit. The airline has experimented with premium services to better compete with competitors in an effort to win back customers.
Last year, the airline lost $256 million from mid-March to June, despite court filings predicting a $252 million profit for 2025. “The airline was overly optimistic on its strategic turnaround coming out of bankruptcy and ran into a more difficult environment,” said Fitch Ratings analyst Joe Rohlena. Spirit was downgraded by Fitch last week, citing the carrier’s “increasing vulnerability to a default scenario in the near term.”
Featured Image Credit: john mckenna; Pexels: Thank you!
