Spirit Airlines’ exit from bankruptcy appears to be in jeopardy amid multiple reports that its liquidation could be near as the result of spiraling war-driven fuel prices.
A Wednesday hearing in U.S. Bankruptcy Court in New York designed to win approval of the airline’s reorganization plan was adjourned until April 23, according to court records. Creditor objections filed before the hearing raise a number of questions about the adequacy of information about the plan, including the budget carrier’s ability to project the impact of higher fuel bills on its finances.
Late evening reports, first from Bloomberg, then CNBC and the Wall Street Journal, said management was negotiating with major creditors, and that liquidation of the Dania Beach-based carrier, which has served Fort Lauderdale-Hollywood International Airport since the early 1990s, could be a possible outcome within days.
Contacted by the South Florida Sun Sentinel about the reports, an airline spokesperson replied: “We don’t comment on market rumors and speculation.”
Despite its second Chapter 11 bankruptcy filing in less than a year last August, Spirit has remained aloft and retained its top market share ranking of passengers served at Fort Lauderdale-Hollywood International Airport. While operating under protection from creditors, it has reduced its fleet of Airbus jetliners from more than 200 planes to just below 80. It has also narrowed a route system that once covered scores of destinations in the U.S., Caribbean and Latin America. Recently, management announced it intends to focus on Fort Lauderdale, Orlando, Greater New York and Detroit as centerpieces of its operation.
While the airline has shrunk, rival carriers such as JetBlue Airways, Frontier Airlines, and Allegiant have all added flights at Fort Lauderdale to various U.S., Caribbean and Central American destinations.
Lender objections to the plan
Lenders that have helped finance Spirit’s operations during its recovery objected on April 10 to the company’s proposed reorganization plan, arguing that an accompanying disclosure statement lacks sufficient information to justify supporting it. The U.S. Trustee’s office, whose mission it is to oversee creditor interests in bankruptcy cases, echoed the theme in its own filing.
According to a filing by Citibank, serving as administrative agent on the lenders’ behalf, the banks assert that the airline seeks to improperly split a $275 million revolving credit agreement into separate pieces of $200 million and $75 million, which would break the loan contract and bypass legal protections that safeguard the lenders’ collateral.
“The Debtors say they will ‘reinstate’ their revolving credit facility [the “RCF”],” the court filing says, “but what they actually propose is to dismember it.”
Moreover, the company’s fuel cost projections “do not reflect the impact of volatility in jet fuel prices on the business,” the filing said.
While crediting management for recognizing the potential negative impact on the airline’s financial results, the lenders’ objection to the reorganization plan asserts that financial projections “do not account for these risks — and in fact, assume that prices ‘return to normal’ by mid-May 2026 without basis.”
“The Debtors fail to provide any projections reflecting the possibility that fuel prices do not normalize from their elevated levels,” the objection adds. “They provide no sensitivity analysis and no modeling of the impact of sustained fuel price increases on the Reorganized Debtors’ cash flow, liquidity, or ability to comply with post-emergence debt covenants.”
The lack of information, the objection went on, “prevents creditors from evaluating the feasibility of the Plan. If the Debtors cannot demonstrate their viability at current [or possibly higher] fuel prices, they have no basis to represent that the Plan is feasible.”
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