Spirit Airlines bankruptcy risk intensifies after Q2 loss

Published on Aug 21, 2025, 10:55 am CDT

6 min read

Spirit raised the specter of a shutdown within a year in an August 11 SEC filing, citing weak leisure demand, shrinking liquidity, and tougher credit-card collateral terms. The airline ended June with $407.5 million in cash and equivalents, then moved to monetize spare engines and mark idle aircraft for sale. Analysts warn that without new capital or a sharp revenue turn, the low-cost carrier faces a liquidity crisis deep into 2025. Management says it is cutting capacity, refreshing products, and selling assets to extend its runway, while competitors prepare to capitalize.

Key Points

Why it matters: A Spirit Airlines bankruptcy or wind-down would reshape U.S. budget travel and fares.
Travel impact: Leaner schedules, tighter seats inventory, and rolling route changes from Fort Lauderdale-Hollywood International Airport (FLL).
What's next: Decisions on asset sales, credit-card collateral by December 31, 2025, and whether unit revenue recovers to satisfy covenants.
Engine sales delivered fresh cash, and 21 aircraft are held for sale as Spirit trims capacity.
Frontier's CEO says his carrier aims to be "last man standing" in the low-cost space next year.

Snapshot

Spirit entered 2025 with $902.1 million in cash while in Chapter 11, then emerged in March after equitizing $795 million of debt. By June 30, cash and equivalents had fallen to $407.5 million as the carrier posted a second-quarter net loss of $245.8 million and a negative 18.1 percent operating margin. Management warned of "substantial doubt" about continuing as a going concern over the next 12 months if results do not improve, highlighting a looming need to post additional collateral to renew its primary credit-card processing agreement. To raise liquidity, Spirit completed sale-leasebacks on 14 spare engines and earmarked 21 A320-family aircraft for sale, while cutting flying and staffing.

Background

Spirit's merger with JetBlue collapsed in early 2024, and the carrier filed for Chapter 11 that November. On March 12, 2025, Spirit exited restructuring after converting $795 million of funded debt to equity, adding new secured debt, and putting a $300 million revolving facility in place. Fresh-start accounting valued its air-carrier slots, including 22 slots at LaGuardia Airport (LGA), at $83.5 million. Pratt & Whitney GTF issues continued to weigh on availability, although Spirit secured credits tied to grounded aircraft. Through spring and summer 2025 the low-cost carrier pivoted toward premium leisure, adding seven rows of extra-legroom seats and announcing new Fort Lauderdale service to Key West International Airport (EYW), Philip S. W. Goldson International Airport (BZE), and Owen Roberts International Airport (GCM). Even so, domestic oversupply and soft pricing pressured yields, and liquidity became the central risk. See our earlier coverage, Spirit Airlines Cuts 270 Pilots in Survival Push and Spirit Airlines Belize Flights, Cayman Service Launch From FLL.

Latest Developments

SEC filing details cash burn, collateral risk

Spirit's August 11 Form 10-Q shows cash and equivalents of $407.5 million at June 30, down from $902.1 million at year-end, with total liquidity buoyed by an undrawn $275 million revolver. Management disclosed negotiations with its primary credit-card processor, which has requested additional collateral to renew an agreement expiring December 31, 2025, a move that could materially reduce unrestricted cash. The filing also cites "substantial doubt" about the company's ability to continue as a going concern within 12 months absent successful liquidity actions and improved performance. Assets held for sale primarily include 21 A320ceo and A321ceo aircraft, and Spirit completed sale-leasebacks on 14 previously owned spare engines.

Network cuts, premium push, and pilot actions

The carrier has trimmed flying roughly a quarter year over year during late spring and early summer as it works to stabilize revenue. Operationally, Spirit is installing seven rows of extra-legroom seating across the fleet to target premium leisure demand, while launching new Fort Lauderdale routes to Belize City and Grand Cayman this winter, and to Key West in November and December. On staffing, Spirit will demote about 140 captains to first officers on October 1, and furlough approximately 270 pilots on November 1 to match the downsized schedule. Analysts remain skeptical about the timeline, with one calling the Q2 results "awful" and predicting the airline may not make it to 2026.

Competitors circle as Frontier talks tough

Frontier reported a second-quarter net loss yet struck a confident tone, with CEO Barry Biffle telling investors he expects Frontier to be the "last man standing" in the low-cost space next year as uneconomic capacity exits. Larger network carriers could also add selective capacity on overlapping routes to pressure Spirit in key markets. Meanwhile, rating agencies flagged rising default risk, citing shrinking liquidity and a difficult pricing backdrop. Spirit's intangible assets include 22 LGA slots, and management has signaled willingness to monetize real estate, aircraft, and excess gate capacity to bridge the gap. See related context, Frontier Airlines warns deeper Q3 loss as demand fades.

Analysis

This crisis is primarily about cash, not brand awareness. Spirit has a cost structure built for dense domestic leisure, but that segment is oversupplied, and fares have lagged inflation. The immediate choke point is the credit-card processing renewal. If the processor increases holdbacks or collateral, Spirit's unrestricted cash could drop at the exact moment it needs flexibility to run the schedule, pay vendors, and absorb seasonality. The airline's sale-leaseback of 14 spare engines and plan to sell 21 aircraft buy time, but selling productive assets reduces future resilience and earnings power.

Management is rightly attempting a product pivot, adding extra-legroom seating and merchandising tiers that can lift revenue per seat without slowing turns. New routes from Fort Lauderdale, including Key West, Belize City, and Grand Cayman, fit a premium leisure thesis, though winter performance will matter. The pilot furloughs and downgrades align staffing with capacity, yet they risk weakening crew morale and network agility if demand rebounds.

Three signposts now matter most. First, the credit-card processor decision before December 31, 2025. Second, execution on asset sales at book or better without eroding core capacity. Third, unit revenue, especially on Florida trunk routes and strongholds out of Fort Lauderdale-Hollywood International Airport (FLL). If those break Spirit's way, the carrier could exit 2025 smaller and more premium, but viable. If not, strategic alternatives will move from theoretical to urgent, and the liquidity crisis will define the path, not the product roadmap.

Final Thoughts

Travelers should expect a leaner Spirit through winter, with fewer frequencies, tighter seat availability on peak days, and occasional last-minute swaps as assets change hands. Watch Fort Lauderdale schedules, and lock in backup options when booking shoulder-season trips. For now, tickets remain valid, and Spirit continues to operate while it raises cash and resets its network. The next 90 to 120 days will hinge on collateral requirements, asset sale proceeds, and whether the premium leisure pivot sticks. However this plays out, the headline risk will remain elevated until the spirit airlines bankruptcy narrative is resolved.