Spirit Airlines is canceling its order for 52 Airbus aircraft and options for 10 more as part of a significant restructuring agreement with aircraft lessor AerCap. The deal, approved by a U.S. Bankruptcy Court, aims to stabilize the airline's finances and includes a $150 million cash injection from AerCap.
Key Takeaways
- Spirit Airlines will reject orders for 52 Airbus planes and options for 10 others.
- Aircraft lessor AerCap will take over the canceled Airbus orders.
- The agreement settles a dispute that was a primary cause of Spirit's second bankruptcy filing.
- AerCap will provide Spirit with a $150 million cash infusion.
- Spirit will shrink its fleet by nearly 100 aircraft and furlough approximately 1,800 flight attendants.
Court Approves Restructuring Agreement
A U.S. Bankruptcy Court for the Southern District of New York has approved a comprehensive settlement between Spirit Airlines and AerCap, the world's largest aircraft leasing company. This agreement resolves a critical dispute that threatened the airline's operations and pushed it into bankruptcy protection.
Under the terms of the settlement, Spirit will formally reject its commitment to purchase 52 Airbus aircraft. The airline will also relinquish its options to acquire an additional 10 planes. These orders will now be transferred to AerCap, effectively removing a substantial long-term financial obligation from Spirit's balance sheet.
In a statement, Spirit said the agreement is a crucial step in its restructuring, allowing it to reduce operating costs by hundreds of millions of dollars. The deal provides a clearer path forward as the carrier works to emerge from bankruptcy.
The Path to Bankruptcy
Spirit Airlines filed for its second bankruptcy following actions taken by AerCap in late August. The lessor terminated lease agreements for 36 new Airbus A320neo family jets scheduled for delivery between 2027 and 2028. AerCap also claimed Spirit was in default on leases for 37 aircraft already in its fleet. While Spirit disputed these claims, the potential loss of access to a large portion of its current and future fleet forced the company to seek bankruptcy protection.
Financial and Fleet Adjustments
The settlement includes several key financial components designed to address the dispute and support Spirit's reorganization. As part of the deal, AerCap will inject $150 million in cash into the airline, providing essential liquidity during the bankruptcy process.
Key Financial Terms of the Settlement
- Cash Injection: AerCap will provide $150 million to Spirit Airlines.
- Security Deposit: AerCap will retain $9.7 million in cash security deposits that Spirit had previously provided for canceled leases.
- Unsecured Claim: The leasing company is granted an unsecured claim of up to $572 million against Spirit. The final collectible amount on this claim is yet to be determined.
In addition to the AerCap deal, Spirit announced that the court has also approved a debtor-in-possession (DIP) financing facility of up to $475 million from its existing bondholders. Of this total, $200 million is immediately available to support the carrier's ongoing operations.
Fleet Overhaul: Spirit Airlines currently operates 214 aircraft. The plan to shrink its fleet by nearly 100 planes represents a reduction of almost 50%.
Future Fleet and Operational Changes
While Spirit is canceling its large, direct order with Airbus, it is not severing ties with the manufacturer or AerCap. The agreement includes provisions for future fleet modernization, albeit on a smaller scale.
Spirit will sign new lease agreements with AerCap for 30 new Airbus A320 or A321 aircraft. These deliveries will be spread evenly across three years, with 10 planes arriving each year in 2027, 2028, and 2029. This revised plan allows Spirit to continue updating its fleet without the financial strain of the much larger original order.
The restructuring will have a significant impact on the airline's workforce. To align with its smaller operational footprint, Spirit plans to furlough approximately 1,800 flight attendants, which constitutes about one-third of its total cabin crew. These furloughs are scheduled to take effect on December 1.
This comprehensive restructuring is a strategic move for Spirit to streamline its operations, reduce costs, and create a more sustainable business model for the future.
The airline's decision to shrink its fleet and workforce reflects a broader strategy to become a more focused and financially stable carrier. By resolving the conflict with its largest lessor and securing new financing, Spirit Airlines has taken a significant step toward navigating its bankruptcy proceedings and reshaping its future in the competitive U.S. airline market.
