Photo via Voice of America Journal.
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Published on
Monday, November 18, 2024
By the
A.M. Costa Rica staff and wire services
Spirit Airlines one of the major United States
ultra-low-cost airlines headquartered in
Miramar, Florida said Monday that
it has filed for bankruptcy protection
and will attempt to reboot as it
struggles to recover from the
pandemic-caused swoon in travel and a
failed attempt to sell the airline to
JetBlue. In Costa Rica, the
airline offers daily direct flights from
Alajuela's Juan Santamarķa International
Airport (SJO) to Guanacaste's Daniel
Oduber International Airport (LIR) via
Fort Lauderdale-Hollywood International
Airport (FLL), Orlando International
Airport (MCO), and George Bush
International Airport (IAH), according
to the Tourism Institute (ICT). Spirit, the
biggest U.S. budget airline, has lost
more than $2.5 billion since the start
of 2020 and faces looming debt payments
totaling more than $1 billion over the
next year, according to a report published by Voice of America
Journal. Spirit said it
expects to operate as normal as it works its way through a
prearranged Chapter 11 bankruptcy
process and that customers can continue
to book and fly without interruption. Shares of Miramar,
Florida-based Spirit dropped 25% on Friday, after The Wall
Street Journal reported that the airline
was discussing terms of a possible
bankruptcy filing with its bondholders.
It was just the latest in a series of
blows that have sent the stock crashing
down by 97% since late 2018 when
Spirit was still making money. CEO Ted Christie
confirmed in August that Spirit was
talking to advisers of its bondholders
about the upcoming debt maturities. He
called the discussions a priority, and
said the airline was trying to get the
best deal it could as quickly as
possible. The chatter in
the market about Spirit is notable, but
we are not distracted, he told
investors during an earnings call. 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. People are still
flying on Spirit Airlines. Theyre just
not paying as much. In the first six
months of this year, Spirit passengers
flew 2% more than they did in the same
period last year. However, they are
paying 10% less per mile, and revenue
per mile from fares is down nearly 20%,
contributing to Spirits red ink. Its not a new
trend. Spirit failed to return to
profitability when the coronavirus
pandemic eased and travel rebounded.
There are several reasons behind the
slump.
Spirits
costs, especially for labor, have risen. The
biggest U.S. airlines have snagged some of
Spirits budget-conscious customers by
offering their own brand of bare-bones
tickets. And fares for U.S. leisure travel
Spirits core business have sagged because
of a glut of new flights.
The
premium end of the air-travel market has
surged while Spirits traditional no-frills
end has stagnated. So
this summer, Spirit decided to sell bundled
fares that
include a bigger seat,
priority boarding, free bags, internet
service and
snacks and
drinks. That
is a huge
change from Spirits longtime strategy of
luring customers with rock-bottom fares and
forcing them to pay extra for things such as
bringing a carry-on bag or ordering a soda.
In a
highly unusual move, Spirit plans to cut its
October-through-December schedule by nearly
20%, compared with the
same period last year,
which analysts say should help prop up
fares. But
that will help rivals more than it will
boost Spirit. Analysts
from
Deutsche Bank and Raymond James say
that
Frontier, JetBlue and Southwest would
benefit the most because of their overlap
with Spirit on many routes.
Spirit
has also been plagued by required repairs to
Pratt & Whitney engines, which
is forcing the airline
to ground dozens of its Airbus jets. Spirit
has cited the recall as it furloughed
pilots.
The
aircraft fleet is relatively young, which
has made Spirit an attractive takeover
target.
Frontier
Airlines tried to merge with Spirit in 2022
but was outbid by JetBlue. However, the
Justice Department sued to block the $3.8
billion deal, saying it would drive up
prices for Spirit customers who depend on
low fares, and a federal judge agreed in
January. JetBlue and Spirit dropped their
merger two months later.
U.S.
airline bankruptcies were common in the
1990s and 2000s, as airlines struggled with
fierce competition, high labor costs and
sudden spikes in the price of jet fuel.
PanAm, TWA, Northwest, Continental, United
and Delta were swept up. Some liquidated,
while others used favorable laws to
renegotiate debts such as aircraft leases
and keep flying.
The
last bankruptcy by a major U.S.
carrier ended when American Airlines emerged
from Chapter 11 protection and
simultaneously merged with US Airways in
December 2013.
Voice
of America Journal, VOA, is a U.S.
government news agency funded by the U.S.
Congress.
---------------- What have you heard about expats affected by Spirit Airlines' filing for bankruptcy? We would like to know your thoughts on this story. Send your comments to news@amcostarica.com
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