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Turbulence Ahead: Spirit Airlines Takes Another Dive

  • Writer: Karina Kohli
    Karina Kohli
  • Nov 5
  • 5 min read

Updated: 4 hours ago

By: Karina Kohli, Class of 2028


Overview


Hold off on packing for now because this airline just filed for Chapter 11 Bankruptcy. Spirit Aviation Holdings, Inc. (OTCMKTS: FLYYQ) (“Spirit”), parent company of Spirit Airlines, filed for its second Chapter 11 Bankruptcy on August 29, 2025, within less than a year of its original filing on November 18, 2024. [1] After a rocky landing when coming out of its first restructuring protection on March 13, 2025, the budget airline company settled an agreement with its debtholders. In its second filing, Spirit planned to borrow up to $475 million to continue flight operations while it works to reorganize; a term commonly known as a debtor in possession filing. [2]


In November 2024, Spirit filed its first Chapter 11 petition after struggling with the aftermath of an engine recall which affected many of its aircraft. [CL1] [3] It also endured cost surges after the COVID-19 pandemic and demand drops in domestic traveling; all leading to its publicly traded stock falling drastically. [4] The original bankruptcy filing was also significantly tied to the legal halt imposed by a federal judge, who denied JetBlue Airways’ acquisition of Spirit for $3.8 billion on antitrust grounds. [5] Due to high costs and low sales revenue, the company has not recorded any profit since 2019. [6]


After emerging from its first restructuring protection in March 2025, Spirit continued to face financial risks, recording approximately $250 million in losses. [7] During this time, Spirit’s President and Chief Executive Officer, Ted Christie, also stepped down from his leadership after being with the company for thirteen years, guiding it through its first reorganization efforts. [8] Thus, by failing to fly in clear skies, the company voluntarily filed its second Chapter 11 Bankruptcy, adjusting and increasing previous attempts.


Chapter 11 Bankruptcy 


A corporation files Chapter 11 Bankruptcy (11 U.S.C. ch. 11 [CL2] – Reorganization) when it plans to continue operations while paying off creditors in slower increments than if it were to liquidate a portion of its assets and seize operations, which is a component of Chapter 7 Bankruptcy (11 U.S.C. ch. 7[CL3]  – Liquidation). Chapter 11 Bankruptcy commences when an entity voluntarily or involuntarily files a petition, and a debtor in possession (DIP) is designated. A DIP will take on a fiduciary role, retaining control of business operations. [9] Immediately after filing the petition, most creditors will be barred from partaking in collection activities, providing some “breathing room” for the debtor during the reorganization process; a term known as the automatic stay. [10] Following the petition, the debtor, in this case, a corporation, will provide a plan to its creditors which is a legally binding document containing information about how the corporation will restructure its operations, and how such operations will be adjusted to focus on paying back creditors. [11] If both the presiding court and its creditors approve the plan, restructuring and repayment will be underway, resulting in either an emergence, dismissal, or liquidation.


First-Class or Class-Action Lawsuit?


Shortly after Spirit’s second voluntary filing, investors filed a class-action lawsuit for securities purchased between May 28, 2025, and August 29, 2025. [12] These investors are currently seeking to recover damages under the claim that Spirit violated several federal securities laws, specifically pursuing remedies under sections 10(b) and 20(a) of the Securities Exchange Act of 1934. [13] These sections generally discuss fraud, through a firm’s financial deception towards its investors, enticing them to purchase shares that rely on purported financial statements. In addition, the Act imposes joint and several liabilty on a corporation for its individual employees’ and representatives’ conduct. [14]


The class action claim against Spirit surrounds its conduct after its first Chapter 11 emergence in late Q1 of this year. In early Q2,  the airline listed its stock on the New York Stock Exchange (NYSE: FLYY). [15] Following this, complaints alleged false, manipulative statements of financial growth and overall operative health while withholding actual statements of debt obligations and adverse market conditions. [16] However, in mid-August 2025, the company filed its quarterly 10-Q report with the SEC, disclosing statements of financial distress within a matter of months since its approved NYSE listing. [17] As a result, Spirit’s stock price plummeted, and in late August 2025, when the company filed for its second Chapter 11, it disclosed that all remaining shares would be cancelled  with regard to its restructuring plan, leaving investors without an opportunity to recover. [18] Since NYSE has delisted Spirit’s stock, it is now trading on the over-the-counter market (OTCMKTS: FLYYQ) for less than one dollar per share. [19]


Preparing for Takeoff or Landing – What’s Next?


        Spirit will continue to face a bumpy ride ahead as it navigates challenges associated with its second reorganization effort. The company’s latest cost-cutting measure involved suspending 365 pilot positions, after grounding 330 earlier this year, with plans to suspend 270 more. [20] Adding to its cuts, Spirit also suspended 1,800 flight attendant positions. [21] Whether it be continuous employment furloughs, airport partnership terminations, or domestic travel footprint decreases, it is vital for Spirit to develop an appropriate strategy to emerge from the clouds a second time.




[1]  Ayesha Ali, Spirit Airlines files for bankruptcy for 2nd time in less than a year, ABC News Network (Aug. 29, 2025), https://abcnews.go.com/Business/spirit-airlines-files-bankruptcy-again/story?id=125110617.

[2]  Leslie Josephs, Spirit Airlines on track for $475 million bankruptcy lifeline, CNBC (Sept. 30, 2025), https://www.cnbc.com/2025/09/30/spirit-airlines-bankruptcy.html.

[3] Leslie Josephs, Budget travel icon Spirit Airlines files for bankruptcy protection after mounting losses, CNBC (Nov. 18, 2024), https://www.cnbc.com/2024/11/18/spirit-airlines-files-bankruptcy-protection.html.

[4] Id.

[5]  Leslie Josephs, Failed JetBlue buyout leaves Spirit Airlines with a tough path forward, CNBC (Jan. 17, 2024), https://www.cnbc.com/2024/01/17/spirit-could-slash-fares-restructure-after-failed-jetblue-takeover.html.

[6] Josephs, supra note 3.

[7] Josephs, supra note 2.

[8] Spirit Airlines Announces Senior Leadership Transition, Spirit Airlines, Inc.: News (Apr. 7, 2025), https://ir.spirit.com/news/news-details/2025/Spirit-Airlines-Announces-Senior-Leadership-Transition/default.aspx.

[9] 11 U.S.C. § 1107 (1984).

[10] John D. Ayer, Michael Bernstein & Jonathan Friedland, Chapter 11–“101”: An Overview of the Automatic Stay, 22 Am. Bankr. Inst. J. 1 (2004),

[11] 11 U.S.C. § 1123 (2005).

[13] Id.

[14] 15 U.S.C. § 78j (2010); 15 U.S.C. § 78t (2010).

[15] Pomerantz LLP Pursues Class Action Lawsuit Against Spirit Aviation Holdings, Inc., supra note 12.

[16] Id.

[17] Id.

[18] Id.

[19] Spirit Aviation Holdings, Inc. (FLYYQ), Yahoo! Finance: OTC Markets OTCPK – Delayed Quote USD (Oct. 17, 2025), https://sg.finance.yahoo.com/quote/FLYYQ/.

[20] Faith Katunga, Spirit Airlines to Cut 365 More Pilot Jobs as Bankruptcy Restructuring Deepens, Yahoo! Finance (Oct. 17, 2025), https://finance.yahoo.com/news/spirit-airlines-cut-365-more-181434676.html.

[21] Id.

 [CL2]11 U.S.C. ch. 11

 [CL3]11 U.S.C. ch. 7


 
 
 
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