The discussion has been raging for weeks, but it took on a new urgency in the last few days. Was a failure of Spirit imminent? The creditors were concerned, and the entire reorganization plan could fall apart in the face of rising fuel. Yet here we are, and Spirit is still flying — at least, it was when I wrote this on Sunday night. I can’t say I understand why. Spirit’s reorganization plan doesn’t seem realistic, and the likelihood is that creditors will just keep losing money as long as this airline keeps going. But this airline is proving to be the little engine that could.
As we all know, Spirit has spent the last several months trying to work through a proper Chapter 11 bankruptcy reorganization after botching its first attempt earlier last year to get any meaningful fixes. This time, it is taking things seriously. We know it has shrunk by more than half, it has shed expensive fleet, and it is focusing on rebuilding around its core in Florida, Detroit, and New York.
We can quibble all we want about things in the plan itself. For example, I don’t understand why the airline still has so many crew bases when it can’t reliably staff the flights it has. But none of that really matters. What matters is that there is a plan on the table, and the creditors have to decide if they like it or not.
So what is this plan? Well, the financials were finally released on April 6 in an updated disclosure statement. Spirit says it will have an operating margin of -7.4 percent this year, but it will be a positive 8.6 percent next year climbing to double digits after.
Let’s start on the revenue side of the plan. Spirit says it will achieve unit revenue of 11.66 cents for 2026, and that will climb to 14.13 cents by 2030 at the end of the plan. That seems wildly optimistic.
February operating numbers were just released, and the prospects worsened compared to January. Excluding special items, I’m seeing a negative margin of about 26 percent, 10 points worse than January. Doing the math, I get a Feb unit revenue that sagged to 9.66 cents. That means Jan and Feb combined are at 9.92 cents. That is going to be a hefty climb to get to 11.66 for the full year, and one that I would say seems very unlikely considering the current state of things.
And this doesn’t even take into account the cost side of the equation. I can’t speak to any of the cost numbers except for one very big one: fuel. Spirit budgeted $2.67 a gallon for fuel in 2026, plunging to $2.14 in 2027. We are currently well over $4 a gallon, and the prospects for a meaningful decline aren’t great. (Though, admittedly, that news changed by the minute.)
I did a little math, and for Spirit to break-even in 2027, it needs to have its very optimistic revenue numbers come true, and it needs fuel to be below $3.15 a gallon. That, of course, requires Spirit getting to 2027 in the first place.
Spring break is now over, so Spirit’s peak revenue-generating capability is done. With all the war and TSA mess in March, I imagine it did not do all that well then anyway. But now for the next couple months, we’re in shoulder/off-peak times where revenues are going to be weaker. Spirit needs to get to summer before it can really start generating revenue again… though probably not profit.
So again, I ask… why are creditors continuing to let this airline keep flying? Do they like waving goodbye to their money? Can they really not think of a better place to put it? (I’ve got plenty of ideas for them.)
As part of its disclosure statement, Spirit has to put out a liquidation analysis. In other words, if it decided to just liquidate, how much money would there be to divvy up? There’s a high and a low scenario, and Spirit says that it should be worth — net of all expenses — between $1.43 and $1.71 billion if converted to a Chapter 7 and sold off. Presumably that number goes down every day the airline continues to lose money. That number doesn’t sound too bad in a world where profitability truly seems quite far off.
All of this comes together to likely explain why the stories have been coming fast and furious about the airline pondering its end. That being said, to be very clear, the management team is not going down without a fight.
One thing I heard last week was that Spirit was trying to pressure the federal government to give it a loan. (I later saw this confirmed by Jamie Baker from JP Morgan Chase in an analyst note.) You can’t blame the management team for trying every possible lever, but this would certainly show the depths of despair at the airline if it’s trying this. After, this would be a terrible idea for the government, and it would undoubtedly require spending all remaining political capital.
If the pitch is that fuel is expensive because of the government’s actions so the airline deserves a bailout, then who DOESN’T deserve a bailout? That doesn’t mean that the powerful Florida political scene couldn’t try to get this pushed through in this current administration, but it seems unlikely.
In the end, it seems like Spirit is trying absolutely everything it can, which is all you can ask from a management team dealt a losing hand. (Remember, it was the previous team under CEO Ted Christie that led the airline through the first failed bankruptcy.) But at this point, I think all we can wonder is… how is this airline still flying?
