Spirit Airlines has officially exited Chapter 11 Bankruptcy protection. The Florida based ultra-low-cost carrier (ULCC) filed for bankruptcy in November of last year and received approval for its restructuring plan last month.
The restructured airline has been taken private by a group of investors including Ken Griffin’s Citadel Advisors, Pacific Investment Management Company and Western Asset Management Company via a $350 million equity investment.
As part of the restructuring, the company’s common stock, $SAVE, was cancelled. According to the airline, newly issued shares now held by Spirit’s new owners are expected to trade in the over-the-counter marketplace. Spirit expects to re-list its shares on a stock exchange “as soon as reasonably practicable”.
Spirit will retain President and Chief Executive Officer Ted Christie to lead the restructured organization. Christie said this regarding the airline’s emergence from bankruptcy:
“We’re pleased to complete our streamlined restructuring and emerge in a stronger financial position to continue our transformation and investments in the Guest experience. Throughout this process, we’ve continued to make meaningful progress enhancing our product offerings, while also focusing on returning to profitability and positioning our airline for long-term success. Today, we’re moving forward with our strategy to redefine low-fare travel with our new, high-value travel options.”
What’s Next for Spirit?
While the carrier has been able to shed debt as part of the reorganization, it is still the same airline at its core. One has to wonder what the plan is here to return to profitability as the aviation industry gets squeezed even more.
I grabbed drinks with a buddy of mine who is a pilot for Spirit shortly after the news broke and he indicated that a merger is the most likely path forward for the airline. The airline attempted to merge with JetBlue prior to filing for bankruptcy but that was blocked by a judge.
My thought has been that, with the company going private, the investors may try and negotiate a new agreement with Frontier. The two airlines are both ULCCs and operate a common fleet type in the Airbus A320 family. However, he threw out a name that took me by surprise.
Apparently rumors are going around amongst the pilots that Southwest Airlines could be in play. While I would have called you crazy months ago if you suggested something like this, Southwest has fundamentally changed over the last nine months and nothing appears to be off the table with them. While I believe this is very unlikely, you never know what deals are being worked behind the scenes.
This will be an interesting story to follow over the next few months. Will Spirit actually begin to turn a profit making an re-list of shares appealing or will it merge with another carrier? I can’t imagine they would go to this much trouble only to liquidate so I’m curious to see what happens.
Summary
Spirit Airlines has officially exited Chapter 11 Bankruptcy protection. The reorganized carrier has been de-listed and is now privately held by a group of the carrier’s investors. Personally I don’t see an independent path forward for the airline, especially with all of the market uncertainty, so I’m interested to see what happens.
