A Spirit Airlines Airbus A320 takes a taxi at Los Angeles International Airport after arriving from Boston in Los Angeles, California on September 1, 2024.
Kevin Carter | Getty Images News | Getty Images
Spirit Airlines is in talks with alternative investment firm Castle Lake about a possible acquisition as it seeks to emerge from bankruptcy, CNBC reported.
Spirit filed for Chapter 11 bankruptcy protection for the first time in a year in August last year after its previous restructuring plan failed.
fellow low-cost airlines frontier airlines The company has been in talks with Spirit for years about a potential merger, including in recent months, but no agreement has been reached, said the people, who requested anonymity to discuss the details of the discussions. The two parties had reached an agreement four years ago, but the deal fell apart after receiving a surprise all-cash offer. jet blue airlines.
Spirit and Castle Lake did not immediately respond to requests for comment.
It was not immediately clear whether Spirit’s bondholders and Castle Lake would reach an agreement, or what form it would take. Minneapolis-based Castle Lake has been active in the aviation finance space for many years. In August, it announced the launch of a new aviation financing arm, Merit Air Finance, with $1.8 billion in deployable capital.
Spirit announced in mid-December that it had amended its agreement with creditors to immediately receive another $50 million in funding, which is the lifeblood of the company. Spirit said on Dec. 15 that further financing is contingent on “further development of standalone reorganization plans or strategic transactions,” adding that “Spirit is currently in active negotiations with respect to each of these possibilities.”
In its fight for survival, Spirit cut flights, reduced its fleet and cut jobs to save money. Last year, the union agreed to cut pay for the airline’s pilots and flight attendants. The Airline Pilots Association said in an open letter on Jan. 13 that its concession amounted to $100 million and called on bondholders to help Spirit rebuild and avoid liquidation.
Dania Beach, Fla.-based Spirit has enjoyed nearly stable profitability and enviable margins for years in the turbulent airline industry. But things have changed since the pandemic, with rising wages and other costs, changing customer preferences and a glut of domestic flights that has caused airfares to fall. This was especially painful for U.S.-focused airlines, which lacked the benefits of luxurious first-class cabins and large credit card and loyalty programs.
The airline’s problems snowballed as Pratt & Whitney’s engine recalls grounded dozens of its Airbus planes starting in 2023, and a planned takeover by JetBlue was blocked two years ago by a federal judge who ruled it was anticompetitive, leaving both airlines to fend for themselves in a situation dominated by the big carriers.
Spirit has sought to win over high-spending customers in recent years by offering more spacious seats and set fares that include seat selection and baggage or allow for changes, to better compete with larger rivals that have shored up high-spending customers’ profits after the pandemic.
