United Airlines pounces on Spirit Airlines bankruptcy with new routes
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Illustration: Maura Kearns/Axios.
One of Spirit Airlines' mainline competitors smells an opportunity to pounce as the budget carrier faces an existential crisis in the form of its second bankruptcy in less than a year.
Why it matters: Spirit entered Chapter 11 late Friday of Labor Day Weekend, saying it planned to stay in business but acknowledging that it didn't do enough during its first bankruptcy in 2024 to find a sustainable path.
Driving the news: United Airlines announced Thursday that it is expanding its winter routes with additional flights in 15 cities, including several destinations that Spirit serves, like Las Vegas, Orlando and Fort Lauderdale, Florida.
- The company even took the unusual PR step of calling out Spirit by name.
- "If Spirit suddenly goes out of business it will be incredibly disruptive, so we're adding these flights to give their customers other options if they want or need them," Patrick Quayle, a senior VP for United, said in a statement.
The other side: Spirit retorted that "we have every expectation to continue" serving customers "for many years to come."
- "While we appreciate the obsession certain airline executives have with us, we're focused on competing and running a great operation," Spirit spokesperson Duncan Dee told Axios in a statement.
- "Suggesting anything else is wishful thinking on the part of a high-cost airline looking to eliminate a low-cost competitor so they can fulfill their ultimate goal of charging American travelers the highest fares possible to visit the people and places they love."
Friction point: It's not uncommon for competitors to pounce when their rivals are knocked to the mat.
- In 2018, bankrupt chain Toys R Us accused Amazon, Walmart and Target of deeply discounting toys when it was at its weakest point, leading to its liquidation.
- In 2011, Barnes & Noble acquired the website and intellectual property of rival bookstore chain Borders for the purpose of ensuring that it didn't make a comeback. (To this day, Borders.com reroutes to B&N's website.)
The intrigue: Spirit entered Chapter 11 without a deal in place to sell itself or merge with another airline.
- The airline has had past M&A attempts scuttled, including deals with JetBlue and Frontier.
- Aviation expert and bankruptcy attorney Hooman Yazhari of law firm Michelman & Robinson told Axios in a recent interview that he expected Spirit to pursue a deal as part of a second bankruptcy.
Threat level: Liquidation is generally a greater possibility during a second bankruptcy — known informally as Chapter 22 — with creditors often questioning whether the underlying business can be saved.
What they're saying: "Spirit has assured customers that operations will continue as normal but still faces the risk that customers may opt to book with other carriers, thus accelerating the company's cash burn," Fitch Ratings said Thursday in a report downgrading Spirit's long-term rating from CCC- to D.
- "Fitch believes that the risk of liquidation is elevated following Spirit's second bankruptcy filing in the past year. The company has limited remaining assets to monetize, and ongoing operating losses, coupled with uncertainties around the sustainability of its business model, reduce the likelihood of additional creditor support."
Yes, but: Several major airlines have filed for bankruptcy and survived in the past, including United itself.
The bottom line: It's crunch time for Spirit.
