Spirit Airlines announced on Friday that its plan to exit bankruptcy has been approved, but following this news, stock investors began to sell off their shares.
Reorganization Plan Approved
After filing for Chapter 11 bankruptcy protection, Spirit Airlines successfully got its reorganization plan approved. On February 20, 2025, the U.S. Bankruptcy Court for the Southern District of New York approved Spirit’s reorganization plan, marking the last major legal hurdle for the airline in its process of exiting bankruptcy. The company is expected to emerge from bankruptcy in the coming weeks.
Investor Reaction
Following the announcement, under Spirit Airlines’ new plan, the airline’s ownership will largely be transferred to its creditors, and the shares held by current shareholders will be rendered worthless. Spirit’s new plan includes:
- Converting $795 million of debt into equity
- Raising $350 million with new equity shares
- Opening up a $300 million new revolving credit facility
- Issuing $840 million in new senior secured debt
As a result of these steps, the company will essentially be owned by its creditors and will cease to be publicly traded. This led to a massive wave of selling among investors, and Spirit’s shares have now become worthless. Investors will see the value of the airline’s shares decline when they move to the OTC (over-the-counter) markets, although the exact date of this transition is still unknown.
The Future of Spirit Airlines
During the bankruptcy process, Spirit Airlines sold some of its aircraft and boasted one of the youngest and most fuel-efficient fleets in North America. Many observers speculated that the airline would explore merger or acquisition opportunities. However, the company’s decision, particularly to reject Frontier’s acquisition offers, suggests that Spirit will continue as an independent carrier.
While many experts predicted that Spirit might be acquired by another airline in the future, with no such deal in sight, it is said that Spirit will remain independent for now. At this moment, the company seems poised to maintain its current structure without any bold moves from another carrier.
