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Published on Aug 12, 2025, 3:23 pm CDT

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Spirit Airlines told investors that, absent successful cash-raising moves, it may not comply with liquidity covenants within the next 12 months, a status that could force a shutdown. In an August 11 SEC filing, the carrier cited weak domestic leisure demand, heavy competition, and credit-card collateral pressures. Spirit posted a second-quarter net loss of $245.8 million on $1.02 billion in revenue, with a negative operating margin of 18.1 percent. Management is exploring aircraft and real-estate sales, excess gate monetization, and deeper cost cuts.

Key Points

Why it matters: A ULCC exit would reshape fares, routes, and competition across leisure markets
Travel impact: Expect continued tight capacity, targeted route cuts, and volatile pricing on overlapping city pairs
What's next: Credit-card contract renewal by December 31, 2025, plus potential aircraft and gate sales
Frontier's CEO says his airline will be the "last man standing" among ULCCs in 2026

Snapshot

Spirit ended the quarter on June 30, 2025, with $407.5 million in cash and cash equivalents, and total liquidity of $682.5 million including revolver availability. Operating loss was $184.1 million, and operating margin was negative 18.1 percent. The filing notes credit-card processors have requested additional collateral to renew an agreement expiring December 31, 2025, which could materially reduce unrestricted cash. On product, the airline introduced a "Go Comfy" style extra-legroom section, seven rows near the front, to stimulate revenue. Cost actions include a planned furlough of 270 pilots this fall and downgrades of about 140 captains to first officers. Twenty-one aircraft are recorded as assets held for sale.

Background

Spirit filed for Chapter 11 on November 18, 2024, then emerged on March 12, 2025, after equitizing about $795 million of funded debt and raising fresh equity. The revival followed the court's January 16, 2024, decision blocking JetBlue's proposed acquisition, which left Spirit to restructure alone during a soft period for domestic leisure demand. Dave Davis, a veteran from Sun Country, became CEO effective April 21, 2025. Since emergence, Spirit has leaned into ancillary revenue and fare bundles, adding seven rows of extra-legroom seats and phasing out the blocked-middle-seat arrangement. The carrier has also executed sale-leasebacks on spare engines and trimmed flying to align with demand, while warning that unit-revenue improvements may lag the pace required by liquidity covenants. Management says more asset monetization and fixed-cost reductions are likely.

Latest Developments

Liquidity crunch, going concern, and credit-card collateral

In the August 11 quarterly report, Spirit said minimum liquidity covenants tied to debt and a credit-card processing agreement require results to improve faster than anticipated. The processor has asked for additional collateral to renew the agreement past December 31, 2025, which could materially reduce cash. To buy time, Spirit is evaluating aircraft and real-estate sales, selling excess gate capacity, and eliminating fixed costs. The company already booked 21 aircraft as held for sale, and it completed sale-leasebacks on certain spare engines. If these steps fall short, management believes a covenant breach is probable within 12 months, an outcome that could trigger defaults and accelerate maturities. The filing frames this as a going-concern risk, underscoring how sensitive ULCC models are to demand, pricing, and credit-card holdbacks.

ULCC shakeout, Frontier's "last man standing" claim

On August 5, 2025, Frontier CEO Barry Biffle told analysts he expects to be the "last man standing" in the low-cost space next year, citing cost advantages and balance-sheet strength. Competitive capacity has already begun to ebb in key markets, which could support fares, but Spirit's filing suggests domestic leisure demand remains fragile through year-end 2025. Frontier also flagged ongoing losses despite revenue progress, highlighting the sector-wide squeeze. For travelers, that means rolling schedule trims, fewer off-peak departures, and sharper price moves on contested routes. Related context is covered in Frontier Airlines warns deeper Q3 loss as demand fades.

Product pivot to extra-legroom seats

Spirit's revenue plan focuses on upselling comfort without abandoning low base fares. The carrier began installing seven rows of extra-legroom seats, about 32-inch pitch, with more than 40 seats per aircraft. The bundle includes a carry-on, no change or cancel fees, priority boarding, reserved bin space, and a snack and nonalcoholic beverage. Installations began in June, with broad rollout slated for July and completion in 2026. The airline hopes premium upsell, plus refined schedules, will lift unit revenue, offsetting softness in discretionary demand. Earlier labor actions, including furloughs and captain downgrades effective in October and November, aim to right-size crew costs as flying is reduced. See our earlier coverage, Spirit Airlines Cuts 270 Pilots in Survival Push.

Analysis, what the Spirit Airlines bankruptcy warning signals

Going-concern language is rare in airline filings, and it often presages urgent financing moves. Spirit's exposure to credit-card collateral is a key red flag because holdbacks directly sap working cash just as bookings arrive. The December 31, 2025, renewal deadline compresses the timeline to stabilize results, monetize assets, and secure cushion capital. The fleet plan offers some levers, including aircraft and gate sales, but those are finite and can reduce future revenue potential. The product pivot to extra-legroom seats is sensible for yield, yet execution requires consistent operations, strong merchandising, and willing demand at higher price points. Frontier's "last man standing" posture underlines a likely capacity shakeout among ULCCs if losses persist into 2026. For travelers, expect targeted route reductions and sharper price cycles, with holiday peaks protected and marginal off-peak flying trimmed. Advisors should monitor Spirit's liquidity disclosures, credit-card collateral talks, and any asset transactions for signals that the cash burn trajectory is improving.

Final Thoughts

Spirit's filing makes clear that liquidity, not demand headlines, will decide its runway. Watch three milestones, asset sales, credit-card collateral terms by December 31, 2025, and whether unit revenue improves enough to satisfy covenants. If those do not break Spirit's way, deeper cuts or strategic alternatives may follow. If they do, the ULCC could exit 2025 smaller, but more durable. Either way, travelers should book early on contested routes and build buffers for schedule changes, especially into shoulder season. The next two quarters will shape the outcome of the Spirit Airlines bankruptcy.