By Daily Mail (U.S.) | Created at 2024-11-18 18:02:08 | Updated at 2024-11-18 20:44:09
2 hours ago
Americans can still book tickets and fly on Spirit Airlines, despite the carrier filing for bankruptcy on Monday morning.
Despite being the biggest budget airline in the US, Spirit has suffered a long run of quarterly losses and has significant debt.
The company wrote an open letter to customers on Monday, reassuring them that flights will continue as scheduled for now, and they can still use loyalty points and credits as normal.
The news of the bankruptcy comes just over a week before Thanksgiving, when millions of Americans plan to travel across the country for the holiday.
'The most important thing to know is that you can continue to book and fly now and in the future,' the letter read.
Filing for bankruptcy does not mean the airline will stop running, rather it gives the company protection to reorganize its business. This often means shedding assets or parts of its operation.
The airline is likely to keep as much of its schedule running in the short term during the holiday period, as this is a key time for the carrier to make a much-needed profit.
But experts warn that cuts to staff or aircrafts may begin to happen after the peak holiday season, which could then begin to disrupt flights.
Spirit Airlines wrote an open letter to customers on Monday, reassuring them that flights will continue as scheduled for now, and they can still use loyalty points and credits as normal
'From a consumer standpoint, you'll need to pay attention if Spirit makes any schedule changes or if they're going to get rid of any aircraft, lay off any pilots and flight attendants - that will affect the traveling public,' Henry Harteveldt, founder of travel consulting firm Atmosphere Research Group, told CNBC.
If the airline does start to cancel flights without rebooking, Americans are now entitled to a cash refund under new rules which came in last month.
Flyers are now guaranteed their money back should a flight be delayed or canceled - and they do not need to file any paperwork.
However the Department of Transportation warns on its website that a company entering into bankruptcy protection could make it more difficult for customers to receive refunds.
'If the airline or ticket agent has filed for bankruptcy, the company may be temporarily prohibited from providing refunds and/or vouchers - for example, to conserve assets,' the website reads.
To protect yourself, Harteveldt recommends buying any airline tickets with a credit card.
That means that if an airline refuses to provide a refund, you are better protected than if you bought the ticket with a debit card or cash.
Airline loyalty points or miles, meanwhile, do not tend to be transferrable by a consumer to another carrier if a company enters bankruptcy.
However frequent flyer programs, like the Free Spirit loyalty program, can be valuable assets that survive bankruptcies, Robert W. Mann Jr., a former airline executive officer and current president of R. W. Mann and Co., an independent airline consultancy, told USA Today.
'That is an asset, at least from the standpoint of people who might acquire them. You're acquiring a customer base as well,' he said.
'That actually could be a source of funding going forward.'
CEO Ted Christie, pictured, said in a statement Monday that 'guests can continue to book and fly without interruption and can use all tickets, credits and loyalty points as normal'
Despite being the biggest budget airline in the US, Spirit has suffered a long run of quarterly losses and has significant debt
Airlines have now been told that automatic refunds must be issued for any 'significant changes' to a flight
It is possible that Spirit could emerge from bankruptcy through merging with another airline - despite past failed attempts to merge with both JetBlue and Frontier Airlines.
But many industry experts anticipate the incoming Trump administration may be more friendly toward mergers than the Biden administration was.
If Spirit merges with another airline, it is likely that the frequent flyer program will survive, and be part of the package and combined with that of the other carrier, USA Today reported.
Spirit Airlines has struggled to recover from the Covid-19 pandemic lockdowns, meaning it has not made a profit since 2019.
The no-frills airline has lost more than $2.5 billion since the start of 2020 and faces looming debt payments totaling more than $1 billion over the next year.
Spirit expects to be delisted from the New York Stock Exchange in the near term.
'I am pleased we have reached an agreement with a supermajority of both our loyalty and convertible bondholders on a comprehensive recapitalization of the Company, which is a strong vote of confidence in Spirit and our long-term plan,' CEO Ted Christie said in a statement on Monday morning.
