Spirit Airlines, which advocates low-cost air ticket sales, recently declared Chapter 11 bankruptcy due to insurmountable losses.
The New York Times reported that in a petition to the court, Spirit Airlines stated its decision was mainly driven by escalating operational losses, headlong debt of $9 billion, and failed attempt mergers.
Ownership and Leadership of Spirit Airlines
For over a decade, Spirit Airlines has been publicly traded in the stock market under the 'SAVE'. Most of its shareholders are big investment companies or institutions as they control 60.1% of the airline's total shares.
In a quiet unflattering way, it appears some 39.2% of organization components own those shares with average people holding the minor companies and individual stakeholders who own few shares.
Nearly 10% of the share was bought by Vanguard Group, Inc. Spirit's next biggest shareholder was BlackRock, Inc. owning about 8%. But this will surely change following the Chapter 11 restructuring of the organization as the creditors will take a substantive majority.
Spirit Airlines is under the general management of its President and Chief Executive Officer; Ted Christie. He joined the airline in 2012 as Chief Financial Officer and became Chief Executive Officer in 2019.
Under his watch, Christie managed and supervised the growth of Spirit's route system by expanding the number of the company's destinations and extending its market coverage.
However, his leadership also suffered major setbacks most notably the adverse effects of the COVID-19 pandemic on air travel and a federal decision that blocked Spirit's proposed merger with JetBlue.
The Road to Bankruptcy for Spirit Airlines
According to Zippia, Spirit Airlines began in 1964 as Clippert Trucking Company, transitioning to air travel in 1983 as Charter One Airlines, offering package tours. By 1992, it expanded to scheduled flights, including routes to Florida and the Bahamas. Renamed Spirit Airlines, it adopted an ultra-low-cost model in 2007.
Spirit Airlines' transformation began in 2006 when Indigo Partners, a private equity firm, gained control. The airline, under the leadership of CEO Ben Baldanza, pursued a strategy of cost-cutting and ultra-low fares with minimal frills.
According to The New York Times, many airlines have filed for bankruptcy over the years. A case in point was 2001 when major carriers American Airlines, Delta, and United declared bankruptcy after the 9/11 attacks.
The same financial troubles hit after the COVID-19 pandemic. While this recovery has tended to be robust among America's largest airlines, many of which have capitalized on pent-up demand for premium and international travel, Spirit Airlines have faced more difficulty with increased cost pressures, particularly on labor, and increased competition.
Spirit Airlines has also faced challenges in its Pratt & Whitney engines, which have forced it to ground many of its Airbus planes. This has given the airline no choice but to furlough pilots awaiting repairs.
Actual trouble for Spirit Airlines began when its merger with JetBlue collapsed. When Frontier Airlines attempted a merger with Spirit Airlines in 2022, JetBlue made a better offer.
The U.S. Justice Department sued to prevent the $3.8 billion deal as it would increase prices for Spirit Airlines customers relying on low fares. A federal judge agreed with this contention and in January, blocked the merger. Two months later, JetBlue and Spirit dropped the deal.
What's next for Spirit Airlines?
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In an open letter, Spirit Airlines described the Chapter 11 filing as a proactive step to reduce debt, improve financial flexibility, and secure its long-term success. Spirit expects to complete this restructuring process by early 2025, with no changes to its day-to-day operations during this time.
The letter also reassured its passengers that they can book flights and use tickets, loyalty points, and perks like credit card rewards without interruption.
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