By Alison Sider and Alexander Gladstone

Spirit Airlines filed for bankruptcy as its ultralow discount model proved insufficient to satisfy its hefty debt obligations after its merger with JetBlue Airways was blocked.

Spirit filed a chapter 11 petition in the U.S. Bankruptcy Court for the Southern District of New York seeking to restructure its debts to bondholders and survive more intense competition from larger airlines for value-minded fliers. The Wall Street Journal reported earlier this month that Spirit was preparing to file for bankruptcy.

A pioneer in the discount-travel sector, Spirit has struggled recently as major carriers have increasingly offered low-price tickets that lure some customers away. A glut of flights on the leisure routes Spirit serves has kept fares lower. At the same time, it has faced skyrocketing labor costs and an engine problem that has kept dozens of its planes on the ground.

Under financial pressure, Spirit furloughed pilots this year and sold aircraft. But these measures didn't enable the carrier to avoid the more comprehensive balance-sheet restructuring it is now seeking.

In 2022, Spirit had agreed to merge with Frontier Airlines, another budget carrier, before JetBlue swooped in with a higher offer that won support from investors. But a federal judge in January barred JetBlue from acquiring Spirit, saying the proposed combination would hurt cost-conscious travelers.

In the wake of the ruling, Spirit shifted to examining options for addressing a large debt maturity due next year and entered restructuring negotiations with its bondholders. It briefly revived discussions with Frontier about a potential merger, though Frontier decided not to continue those talks.

Write to Alison Sider at alison.sider@wsj.com and Alexander Gladstone at alexander.gladstone@wsj.com

(END) Dow Jones Newswires

November 18, 2024 05:30 ET (10:30 GMT)

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