……The infusion is needed to keep the airline functioning as it restructures, the court ruled

By Zach Vasile

Key Takeaways:

A U.S. bankruptcy court has permitted Spirit to tap $275 million in emergency funds as it prepares to restructure its business.

According to a report from Law360, U.S. Bankruptcy Judge Sean H. Lane in New York approved the ultra-low-cost carrier’s move to draw the money from its revolving credit facility, revenue, and other accounts. Lane ruled that access to the liquidity is “obviously necessary” to keep the airline operating.

Spirit filed for Chapter 11 bankruptcy protection on Aug. 29, the second time it has done so in under a year.

The immediate impetus was the unexpected termination of aircraft leases by AerCap, Spirit’s largest lessor, but the airline has been struggling with high debt and weakened demand for months. Earlier in August, it warned investors that it may not survive 2025 as a going concern.

Last week, Spirit confirmed that it will discontinue service in 11 U.S. markets this fall, including Portland, Oregon, Salt Lake City, and San Diego.

Spirit recently received approval from the bankruptcy court to continue normal operations while it restructures. It also told the court that it is having “productive” discussions with its secured bondholders and revolving lenders.

“We are pleased to have reached this first milestone in our restructuring process, which will support normal operations as we take decisive action to ensure that Spirit continues delivering the best value in the sky for years to come,” Spirit President and CEO Dave Davis said in a statement.

“With these approvals in place and access to the many new tools now available to us, we can continue to implement our transformation to build a stronger foundation and future for Spirit.”

Spirit ended its first stint in bankruptcy in March. It equitized $795 million in debt, secured $350 million in new funding, and announced plans to become the “premium” option among low-cost airlines.

New perks followed, including extra-legroom seats and plans for a Spirit-branded debit card, but the changes have not been enough to reverse the carrier’s fortunes.

Industry experts have criticized Spirit for avoiding hard decisions during its first bankruptcy, like renegotiating aircraft leases or scaling back operations.