Budget flights hang in balance as bankrupt Spirit Airlines turns to private equity for lifeline: report

Beleaguered carrier Spirit Airlines may get a lifeline out of bankruptcy.

The low-budget carrier is in talks with Castlelake, a global alternative investment firm with approximately $33 billion in assets under management, about a potential takeover, according to CNBC.

The airline has long struggled to compete with rival carriers that offer various levels of service and fly to more destinations. Its financial situation became so perilous that the airline was forced into bankruptcy twice in one year. In August, it said it had entered the Chapter 11 process after failing to complete a reorganization less than a year earlier.

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FOX Business reached out to Spirit Airlines and Castlelake for comment. 

The airline’s CEO, Dave Davis, wrote in an open letter to customers that its second restructuring process would "ensure the long-term success of our company so we can continue to serve our Guests well into the future."

Spirit added that "virtually every major airline has used these tools to improve their businesses and position them for long-term success."

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However, Spirit warned in a Securities and Exchange Commission filing in early August that it might not survive another year. The airline said in the filing that it continues to be affected by "adverse market conditions," including continued weak demand for domestic leisure travel in the second quarter of 2025. The persisting problems created a "challenging pricing environment," the airline said. 

The carrier also projected that it will continue to "experience challenges and uncertainties" in its operations for the remainder of fiscal year 2025. 

The airline first filed for bankruptcy in November 2024 after two failed mergers over the previous two years with Frontier and JetBlue. 

The Justice Department argued at the time that blocking JetBlue's acquisition of Spirit violated antitrust law and would've hurt consumers by leaving them with fewer choices among budget air carriers and higher air fares.

Citadel co-founder Ken Griffin on Wednesday blamed the Biden administration for the rejected JetBlue merger and its impact on his firm.

"We happened to be a creditor of Spirit. Their merger with JetBlue was stopped. Spirit's in bankruptcy today," Griffin said at the World Economic Forum in Davos, Switzerland.

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The no-frills airline has been attempting to rebrand itself as more premium as customer preferences have shifted away from low-cost, but it has struggled with budget cuts and less demand created by uncertainty in the economy.

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During both restructurings, the airline assured customers it would continue to operate normally throughout the bankruptcy process, and passengers could use tickets, credits and loyalty points on flights.