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Spirit Airlines Bankruptcy: Are Flights Canceled? What About Rewards? Your FAQs, Answered
By Pete Grieve MONEY RESEARCH COLLECTIVE
Airline bankruptcies like Spirit’s are common and usually don’t lead to flight cancellations. But customers and investors will be impacted.
Spirit Airlines, known for being one of the cheapest carriers in the U.S., announced Monday morning that it’s filing for bankruptcy as it struggles to overcome challenges like increased competition on its leisure routes and higher labor costs.
Whether you have an upcoming Spirit flight, a balance of Spirit miles in your account or ownership of the airline’s stock, you likely have some questions about what this all means — not just for the airline, but for you.
Take a deep breath. Airline bankruptcies are actually relatively common, and they typically don’t lead to immediate flight cancellations. But customers — and investors — will still likely be affected by this bankruptcy process in several ways.
Here’s what we know right now:
What does bankruptcy mean?
Companies like Spirit elect to file for Chapter 11 bankruptcy protection in dire financial circumstances in order to restructure debts and reorganize the business.
Unlike Chapter 7 bankruptcy, in which a company ceases operations and its assets are liquidated, chapter 11 protection can allow the business to keep operating.
What will happen to Spirit Airlines now?
Spirit said in a news release that it hopes to continue flying during bankruptcy and emerge in a stronger financial position as a result of the process.
Spirit had been operating with about $3.6 billion of long-term debt, the airline said in a court filing Monday. The company said the restructuring moves should reduce its debt by $795 million, with creditors swapping debt in exchange for equity.
Spirit said it’s raising $350 million through an equity rights investment, and bondholders are providing $300 million of financing that will support the company in the bankruptcy process.
Are my Spirit flights canceled?
In its statement, Spirit Airlines said it “expects to continue operating its business in the normal course throughout this prearranged, streamlined Chapter 11 process.” That means existing Spirit tickets are valid, and customers can continue booking new tickets, the airline said.
Spirit also noted that “other airlines that are operating successfully today have undertaken a similar process.” However, in the past, other airlines have taken significant steps to cut costs during the bankruptcy process, including trimming flight schedules and reducing fleet sizes.
Spirit already planned to reduce its flight schedule by 20% this quarter compared to the prior year.
While near-term disruptions to existing bookings may be unlikely, customers with plans to fly Spirit Airlines should monitor their itineraries for any unexpected changes.
What happens to my Free Spirit points?
Spirit Airlines said customers will be able to use their credits and loyalty points “as normal.”
The airline’s frequent flyer program is called the Free Spirit loyalty program. General customers earn six points for every dollar spent; these points can then be used to book flights.
In the past when U.S. airlines have filed for bankruptcy, frequent flyer miles have usually been honored. If the airline were to be liquidated, however, it could be a different story.
In 2022, JetBlue arranged to acquire and merge with Spirit, but federal antitrust regulators intervened to block the plan earlier this year. While there are no indications of plans for a merger at this time, it’s notable that the incoming Trump administration is expected to be more friendly toward mergers.
What’s next for Spirit stock after the bankruptcy?
According to the New York Stock Exchange, trading on Spirit Airlines stock was halted Monday morning due to regulatory concern. The airline, which went public in 2011, said in its statement that it “expects to be delisted from the New York Stock Exchange in the near term.”
As of Monday, the company’s stock price was down over 93% this year. Its stock will trade in the over-the-counter market, and the shares will ultimately be canceled, Spirit said.
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Has this ever happened before?
Yes, many U.S. airlines have filed for Chapter 11 bankruptcy protection in recent decades. A number of major airlines still in operation filed for bankruptcy and made it to the other side, including:
- American Airlines (filed in 2011)
- Frontier Airlines (2008)
- Delta Air Lines (2005)
- United Airlines (2002)
JetBlue and Southwest Airlines are the only large American airlines that haven’t yet gone through bankruptcy.
In other cases when airlines have filed for bankruptcy, they’ve ceased operations and had all their assets sold. Examples include Pan American Airways, which filed for bankruptcy in 1991, and Trans World Airlines, which ceased operations in 2001.
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Pete Grieve is a New York-based reporter who covers personal finance news. At Money, Pete covers trending stories that affect Americans’ wallets on topics including car buying, insurance, housing, credit cards, retirement and taxes. He studied political science and photography at the University of Chicago, where he was editor-in-chief of The Chicago Maroon. Pete began his career as a professional journalist in 2019. Prior to joining Money, he was a health reporter for Spectrum News in Ohio, where he wrote digital stories and appeared on TV to provide coverage to a statewide audience. He has also written for the San Francisco Chronicle, the Chicago Sun-Times and CNN Politics. Pete received extensive journalism training through Report for America, a nonprofit organization that places reporters in newsrooms to cover underreported issues and communities, and he attended the annual Investigative Reporters and Editors conference in 2021. Pete has discussed his reporting in interviews with outlets including the Columbia Journalism Review and WBEZ (Chicago's NPR station). He’s been a panelist at the Chicago Headline Club’s FOIA Fest and he received the Institute on Political Journalism’s $2,500 Award for Excellence in Collegiate Reporting in 2017. An essay he wrote for Grey City magazine was published in a 2020 book, Remembering J. Z. Smith: A Career and its Consequence.