(Reuters) -Spirit Airlines (SAVE) has filed for bankruptcy protection, it announced on Monday, after the pioneer of no-frills air travel in the U.S. struggled with a long string of quarterly losses and significant debt.
The airline’s share price rose 3% before the bell on Monday.
The airline’s problems were compounded after the collapse of its planned $3.8 billion merger with JetBlue Airways in January and the impact of RTX’s Pratt & Whitney Geared Turbofan (GTF) engines that grounded many of its planes stayed.
Spirit, recognized for its bright yellow livery, had been losing money despite strong travel demand as it struggled with inflated costs.
The airline listed its estimated assets and liabilities at between $1 billion and $10 billion each, according to a lawsuit filed Monday.
Spirit has entered into an agreement with its bondholders that is expected to reduce overall debt and provide greater financial flexibility.
The airline has received a commitment for a $350 million equity investment from existing bondholders as part of its prearranged Chapter 11 bankruptcy protection.
Existing bondholders will also provide $300 million in debtor-in-possession (DIP) financing, which, together with available cash, is expected to support the airline through the Chapter 11 process.
Spirit expects to be delisted from the New York Stock Exchange in the near future.
The company started in 1964 as a long-distance transportation company before switching to aviation around 1983. It offered leisure packages to popular destinations under the name Charter One Airlines and was renamed Spirit in 1992.
The discount airline became popular with price-conscious customers who wanted to forego amenities such as checked bags and seat assignments.
Ultra-low-cost airlines, which have excelled at keeping their costs low and offering affordable, no-frills travel, have struggled since the pandemic as travelers prefer to pay extra for a more comfortable trip while seeking experiences.
Spirit’s problems, along with those at some of its rival budget airlines, have sparked talk of a flawed business model among some Wall Street analysts.
(Reporting by Shivansh Tiwary in Bengaluru; Editing by Sriraj Kalluvila)