What Spirit’s Bankruptcy Means for Pittsburgh

Spirit Airlines filed for Chapter 11 bankruptcy protection this week amid public financial challenges and its failed merger agreement with JetBlue, which was rejected by a federal judge earlier this year.

Despite its bankruptcy filing, Spirit is expected to continue normal operations at PIT without affecting travelers.

Spirit’s financial challenges have been monitored by PIT over the past several months, and the airport will continue to do so throughout the airline’s reorganization process, said Bryan Dietz, senior vice president of Air Service and Commercial Development.

“Spirit has notified us they will continue operating normally as they are today throughout the bankruptcy process with no impact on day-to-day operations for customers,” said Dietz. “Spirit is an important partner at PIT, and we will support them throughout this process.”

Spirit began service to PIT in 2017 and is among many lower-cost airlines PIT has added to reduce fares and add more nonstop destinations for travelers. Since starting service, Spirit has steadily grown its PIT network to become its largest ultra-low-cost carrier and fifth-largest carrier overall, flying nearly 10 percent of the airport’s total passengers as of October.

Over the last decade, PIT’s air service strategy has centered around diversifying its airline mix. The strategy runs parallel to PIT’s transition from a major connecting hub to an origin-and-destination airport that prioritizes serving the Pittsburgh market.

“The air service diversification strategy our team has pursued over the last 10 years provides stability both for our airport and the region so that we are not reliant on any single carrier,” Dietz said. “PIT continually partners with all airlines to ensure its air service portfolio is maximized for the Pittsburgh market.”

In the span of 10 years, PIT has added carriers including Allegiant Air, Spirit, Alaska Airlines, British Airways, Breeze Airways, Sun Country Airlines and Icelandair. It has also added service to destinations on existing carriers like American Airlines, Delta Air Lines, Southwest Airlines and United Airlines.

A total of 15 airlines now service PIT today. The airport has raised its total destination count from 36 cities to 62.

Rhett Morgan, senior director of Business Development for Ailevon Pacific, an aviation consulting firm, said it is important for airports to diversify their air carrier offerings to weather any volatility in the airline industry. “Each airline goes through these peaks and valleys and ebbs and flows of business,” he added.

“In Pittsburgh’s case, you’ve got a great mix of legacy, ultra-low-cost and even international carriers. That way you provide your customer base options – economy, premium domestic, international – across all carriers.”

Reorganization

Spirit announced it had reached a restructuring support agreement with a supermajority of its bondholders, backstopped by $350 million in equity and an additional $300 million in debtor-in-possession financing, that will enable the airline to reduce its debt, increase financial flexibility and set up a plan for long-term success of the airline.

“Guests can continue to book and fly without interruption and can use all tickets, credits and loyalty points as normal,” the airline reported in a statement.

In addition, Spirit stated the Chapter 11 process in the United States Bankruptcy Court for the Southern District of New York will not impact wages or benefits of its employees. It will also continue to pay vendors, aircraft lessors and holders of aircraft indebtedness.

“This set of transactions will materially strengthen our balance sheet and position Spirit for the future while we continue executing on our strategic initiatives to transform our guest experience, providing new enhanced travel options, greater value and increased flexibility,” Spirit president and CEO Ted Christie said in a statement.

Spirit expects to emerge from Chapter 11 protection sometime in first quarter of 2025. In the meantime, Morgan, who has over 20 years of industry experience in network and commercial planning, said the flying public should feel comfortable booking tickets through Spirit during the process.

“Many of the airlines have gone through reorganization just for the public to continue flying on those carriers. It shouldn’t have any direct impact on the Pittsburgh passenger.”

Spirit’s challenges

Spirit has navigated through various challenges since the COVID-19 pandemic that have affected its fleet, costs and overall business. A shortage of Pratt & Whitney engines has impacted operators of the Airbus A320neo series aircraft, including Spirit. Like many carriers worldwide, Spirit has grounded dozens of its A320neo family planes as they await new engines.

Additionally, low-cost and ultra-low-cost carriers are adjusting to market dynamics post-pandemic, namely the rise of premium air travel. “A lot of the flying public is preferring premium travel now,” said Morgan.

Carriers like Spirit have made significant changes to their business models to include new fare bundles to attract premium fliers, new seating options and new pricing structures.

READ MORE: Spirit Announces Big Guest Experience Changes

Airlines, overall, have also faced rising labor costs, with low-cost and ultra-low-cost carriers especially impacted. New pilot and flight attendant contracts have made it more challenging for carriers like Spirit, Morgan said.

“As you increase fares to a certain point, demand goes away for the ultra-low-cost segment. They’re having a hard time recouping that and offsetting their increase in labor costs compared to legacy carriers.”

In February 2023, Spirit announced it had reached a merger agreement with rival Frontier Airlines. Months later, however, Frontier abandoned its offer after JetBlue engaged with Frontier in a bidding war for Spirit.

Spirit chose JetBlue’s offer, but a federal judge nixed the deal in January 2024 after the Department of Justice sued to block the merger over antitrust concerns.

Earlier this month, the Wall Street Journal reported that Spirit and Frontier re-engaged in merger talks, but the airlines never reached a formal agreement.

To raise cash, Spirit has agreed to sell over 20 aircraft from its Airbus A320 and A321 fleets and has furloughed 186 pilots. The airline will furlough another 330 pilots in early 2025.

Spirit is the first major U.S. airline to file for bankruptcy protection since American Airlines in 2011. American exited bankruptcy before merging with US Airways in 2013.

Chapter 11 bankruptcies are nothing new for the airline industry. Many U.S. carriers successfully reorganized post-9/11. Delta and United each went through Chapter 11 protection in the 2000s; former carriers Northwest Airlines and US Airways also went through bankruptcies during the decade.

US Airways merged with America West Airlines in 2005 before its merger with American years later. Delta and Northwest merged in 2008 and United merged with Continental Airlines in 2010.

Other airlines that have reorganized through Chapter 11 bankruptcy include Frontier in 2008 and regional carrier Republic Airways in 2016.

Like other carriers in the past, Morgan is confident Spirit will emerge from bankruptcy protection. He believes Spirit will either exit reorganization as a successful standalone carrier or find a merger partner.

“The good thing is Pittsburgh is set up nicely whether Spirit comes out as a solo carrier or if they merge with another carrier,” he said. “A solo carrier or merged carrier would already have a presence in Pittsburgh and likely build on that presence.”