What Spirit's Second Bankruptcy Says About Ultra-Low-Cost Travel's Future — And Why American Airlines Is Watching Closely

• Spirit Airlines filed for Chapter 11 bankruptcy protection in the Southern District of New York in August.
• A Reuters report, citing a Dec. 5 court filing in the Southern District of New York, said American Airlines has requested to receive all notices.
• The company is scrapping its plans to furlough 365 pilots, stemming from the restructuring process.

There’s no doubt that 2025 has been a mixed bag for many companies, but for Spirit Airlines, it was indeed a difficult one, with the budget carrier filing for a second bankruptcy in August, just a year after the first.

Now, the company is seeing interest in its bankruptcy proceedings peak majorly from its bigger rival, American Airlines, which has reportedly requested to receive notices in Spirit’s bankruptcy proceedings.

A Reuters report, citing a court filing from Dec. 5 in the Southern District of New York, said American Airlines has requested receipt of all notices, including operating reports, plans of reorganization, and liquidation statements.

Budget-Carrier: A Strained Afterthought

Spirit is widely known as an ultra-low-cost carrier that offers airline fares at very low prices, but everything else is an add-on, with extra charges for specific seats, carry-on bags, and meals, among others.

Spirit's bankruptcy once again this year highlighted how trying to be budget-friendly has eaten into its profits, without a full-blown operating model designed to prevent the bottom line from being squeezed.

Wall Street analysts have noted that the pandemic became a bigger headache for budget carriers, as customers sought to travel more comfortably and skipped long queues.

Spirit has been grappling with mounting losses over the last several quarters, making it an outlier among other airlines, mainly Frontier, which has seen more minor losses.

The Second Bankruptcy

Spirit Airlines filed for Chapter 11 bankruptcy protection in the Southern District of New York in August. The company noted that it was looking towards potential financing that may be needed later in the proceedings.

The company said it would reduce its presence in certain markets and cut its fleet to reduce its debt and lease obligations. Spirit said it expects to generate hundreds of millions of dollars in annual operating savings.

The company had first filed for bankruptcy in November of 2024. "Since emerging from our previous restructuring, which was targeted exclusively on reducing Spirit's funded debt and raising equity capital, it has become clear that there is much more work to be done and many more tools are available to best position Spirit for the future," said CEO Dave Davis.

The company has been operating as usual during the restructuring process and said in August that guests can use credits and loyalty points. Spirit said that wages and benefits will continue to be paid and honored for employees of the company, including contractors.

Backtracking On Recent Layoff

In October, the company announced plans to furlough 365 pilots and reduce the rank of up to 170 more in the first quarter of 2026, stemming from the restructuring process.

According to a Reuters report last week, Spirit has scrapped this plan and did not state a reason for the cancellation. The company has, however, continued with the other layoffs it has announced since September.

American Airlines’ Move

The move from American Airlines comes at a time when travel demand has remained strong in the United States, even as consumers have broadly become more cautious about spending. Travelers seeking comfort are booking premium seats and are not shying away from paying extra.

The most recent strain for most airlines was the federal government shutdown, which caused delays and cancellations, making travel difficult and creating operational headwinds for major carriers.

When Spirit announced its second bankruptcy, analysts expressed interest in United Airlines, American Airlines, and Southwest in buying the struggling planemaker’s assets.

What Is Retail Thinking?

Retail sentiment on American Airlines was in the ‘bearish’ territory compared to ‘bullish’ a week ago, with message volumes at ‘normal’ levels, according to data from Stocktwits.

The sentiment on Spirit Airlines improved to ‘neutral’ from ‘bearish’ territory a day ago, with message volumes at ‘normal’ levels.

Shares of American Airlines have declined by over 15% this year.

For updates and corrections, email newsroom[at]stocktwits[dot]com.

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