American businesses are dropping like ninepins under the strain of the looming economic crisis. The latest to fall is Spirit Airlines, a staple of the American airways, as it files for bankruptcy.
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Spirit has had a tough time of it recently, with one of their planes getting hit by gunfire over Haiti. However, this pales in comparison to the crippling financial losses the company has had the past few years.
Spirit Airlines' losses have totalled a staggering $2.5 billion since the start of 2020, with a debt totalling $1 billion, leading to their claim for bankruptcy. The reasons for the huge losses are clear. Many airlines across the world felt the pinch of the pandemic, and only the strongest bounced back.
Whereas some airlines were able to claw back the lockdown losses, Spirit clearly has not. Since 2018, their stock price has plummeted 97% with a real death blow coming on Friday. The rumors of the bankruptcy filing dropped the stock by 25% in one fell swoop.
Is It All Over For Bankrupt Spirit Airlines?
The company has filed for Chapter 11 bankruptcy, meaning if you have flights booked with Spirit, these will still be honoured. The airline can still be used as normal, with booking and flights operating for the foreseeable future.
This type of bankruptcy means that the company will go into administration. A big reshuffle and reorganisation will be performed under court supervision. This prevents the company from disappearing completely. Spirit Airlines is an important company for the US economy. If it simply disappeared overnight, the effects would be wide-reaching.
When asked to comment on the bankruptcy, Spirit CEO Ted Christie had this to say on the matter: "The chatter in the market about Spirit is notable, but we are not distracted. We are focused on refinancing our debt, improving our overall liquidity position, deploying our new reimagined product into the market, and growing our loyalty programs." They aim to reassure and keep the few remaining stockholders in place. More losses could be the end for the company.
The damages come amid a weird time for Spirit Airlines. Although people are flying 2% more than last year, they are paying 10% less on average. On top of this, many of the overheads for the company have risen. Oil is more expensive than it has ever been, and staff costs are always growing. Some serious reshuffling is needed to get Spirit Airlines out of its bankruptcy.
