A US bankruptcy court has approved Spirit Airlines’ plan to reorganise through a Chapter 11 process and emerge with a stronger balance sheet.
Florida-based Spirit said on 20 February that US Bankruptcy Court for the Southern District of New York confirmed its plan, which includes equitising nearly $800 million of debt, an equity infusion of $350 million and the issuance of $840 million in new debt to bondholders.
”In addition, Spirit will enter into a new revolving credit facility of up to $300 million,” the company says. ”Spirit vendors, aircraft lessors and holders of secured aircraft indebtedness will not be impaired.”
Spirit says it will complete the Chapter 11 process in coming weeks.
The ultra-low-cost carrier has continued operating throughout the USA since filing for court-supervised Chapter 11 bankruptcy protection in November. However, it has laid off hundreds of employees and furloughed hundreds of pilots as it attempts to downsize its network. It also sold more than 20 Airbus A320-family jets.
Meanwhile, Spirit continues spurning advances from competitor Frontier Airlines, which has been aggressive in attempts to acquire Spirit.
Frontier chief executive Barry Biffle maintained as recently as 19 February that his company’s latest bid offered more value to Spirit’s shareholders than the airline’s standalone plan.
Spirit has insisted for several months it will emerge from bankruptcy a stronger organisation capable of competing in the USA’s ultra-competitive low-cost segment. Some airline analysts have questioned whether the carrier’s new cost structure will enable it to continue operating for the long term, however.
Chatter of consolidation has been growing within the US airline industry. JetBlue Airways acknowledges talking with several US carriers regarding potential combinations, including re-engaging its Northeast Alliance with network carrier American Airlines.
Dave Davis, chief financial officer for Minneapolis-based discounter Sun Country Airlines, said during the Barclays Industrial Select Conference on 20 February that the carrier views some potential combination partners favourably.
”We think there are combinations with Sun Country that make sense; we continue to look at things,” he says. “It’s certainly not our base plan, but I do believe the industry needs to consolidate on the low-cost side.”
