💥New Chapter 22 Bankruptcy Filing - Spirit Aviation Holdings, Inc ($FLYY)💥
Five months later, the ULCC crashes back into chapter 11
By now we’re sure most of you have heard the news: Spirit Aviation Holdings, Inc. ($FLYY) (“Spirit”) and five affiliates (together with Spirit, the “debtors”) filed chapter 22 bankruptcy cases on August 29, 2025 (in the Southern District of New York again … before Judge Lane again) — cementing itself as perhaps the most egregious violator of PETITION’s “Two-Year Rule” … literally … ever.
It’s hard to imagine why the debtors are having problems and how we got here, 🙄:
Seems like these guys got it right:
Pour one out for the schmucks who chose biglaw as a profession: we hope you loved missing Labor Day weekend. If it makes you feel any better, Johnny was thinking of — and getting sh*tfaced for — you while flying to an exciting locale on a lovely airplane … just not one flown by these f*cking idiots ☝️.
Let’s jump straight into the September 2, 2025 first-day hearing — an event that gave us immediate PTSD. Recall Spirit’s counsel, Davis Polk & Wardwell LLP’s (“DPW”) Marshall Huebner, in the prior whatever-the-f*ck-non-bankruptcy-bankruptcy:
He legit tried to convince everyone that Spirit hadn’t filed a bankruptcy proceeding and, well folks, here he goes a-f*cking-gain:
“Rather than going back decades or even years, I would instead like to start only a few months ago on November 18th of last year. Because, despite your Honor’s experience with Spirit in its previous surgical lightning round restructuring last fall, I would like to submit that for all intents and purposes, this one and not that one would, in fact, be the company’s first true chapter 11 proceeding.”
LOL, hot damn, Mr. Huebner, if you’re not consistent to a fault.*
Recall that Spirit filed in November ‘24 after Judge Young, from the U.S. District Court for the District of Massachusetts, did consumers a solid and basically made a filing inevitable after blocking Spirit’s then-pending merger with JetBlue Airways Corp ($JBLU).
The US Department of Justice popped open a budget-friendly champagne sparkling wine too, heralding its alleged win for consumers and competition. Here’s then U.S. Attorney General, Merrick Garland, on the decision:
“Today’s ruling is a victory for tens of millions of travelers who would have faced higher fares and fewer choices had the proposed merger between JetBlue and Spirit been allowed to move forward.”
In March ‘24, Spirit and JBLU called off the merger and, once again, the DOJ issued a press release that celebrated its antitrust crusade. Here’s then Assistant Attorney General, Jonathan Kanter:
“We fought this case to protect consumers who, as the court recognized, ‘otherwise would have no voice.’ I am incredibly proud of the Antitrust Division’s team and our state law enforcement partners’ tireless advocacy.”
Congratu-f*cking-lations y’all. Your actions directly led to Spirit’s November ‘24 totally-not-a-filing filing, and we covered it (and the run-up to it) extensively …
… so we’ll largely stop there on it other than to say the first bankruptcy right-sizing was primarily a financial restructuring …
… and the plan was to cut that debt stack by $795mm via equitization of the senior secured notes and convertible senior notes, while simultaneously providing some new money via a $350mm equity rights offering and $840mm in exit secured notes.**
In March ‘25, Spirit got the court’s go-ahead and emerged from bankruptcy. The next month, it then got approval to list on the NYSE American exchange and trading began on April 29, 2025. Here’s a recording of the stock performance:
What? Is that 👆 not accurate? Take a look ⬇️:
Let’s peep the 2Q’25 10-Q to see what went right and, more importantly, what went wrong. Starting with the former, and at the risk of overloading y’all with airline KPI jargon, the table below gives a good overview:
You’ll notice that Spirit has significantly lowered its overall volume numbers, primarily due to a culling in departure flights, which resulted in the debtors’ efforts to offload 21 of their 215 Airbus A320-family aircraft (but of which at least 19 still reside on the balance sheet).
The good news is that, in Spirit’s attempt to rebrand itself out of the ultra low cost carrier bucket, revenue KPIs don’t look half bad.
But further down the income statement nothing much changed. Spirit reported 2Q’25 revenues of $1b, down 20.4% YoY, and operating loss actually ballooned to $184mm in 2Q’25 from $153mm in 2Q’24. It also burned through $250mm in operating cash for the period starting March 13, 2025 to June 30, 2025.
A far cry from the projections used to confirm the last bankruptcy plan, which show, LOL, a $222mm net operating loss for FY25.
Performance. Was. Not. Even. Close. Hell, Q2’25 got Spirit ~83% of the way to its yearly loss goal.
Here’s the as-financially-restructured debt load …
… except, um, the 10-Q is dated August 11, ‘25, and given Spirit continued to hemorrhage cash, it included this nugget:
Less than two weeks later, Spirit added to its $407.5mm of unrestricted cash by drawing down the full $275mm on its revolver.***
But let’s back up again to August 13, 2025 because, by then, employees were already sh*tting their pants and CEO Dave Davis tried to calm the masses via memo:
“Yesterday, we filed our 10-Q, outlining our second quarter 2025 financial results. This filing generated media coverage and, naturally, a lot of questions.
Let me start by providing some context around what’s included in the report. The report uses the phrase ‘substantial doubt about the Company’s ability to continue as a going concern.’ This is a phrase required by our outside auditors to convey that there is risk if we do not make changes. But, we are.”
A week or so later, on August 22, 2025, Moody’s Ratings downgraded Spirit’s corporate family rating to Caa3 from Caa1 due to “deteriorating liquidity”:
“We forecast Spirit will burn more than $500 million of cash in 2025 due to weak domestic leisure demand, elevated domestic capacity and a challenging pricing environment. We forecast this amount of cash burn will result in the company violating its minimum liquidity covenant of $450 million as early as the end of 2025, barring any liquidity raises by the company.”
And three days later, on August 25, 2025, Spirit’s largest lessor, AerCap Holdings N.V. ($AER), presumably spooked by the disastrous operational results since emergence, pulled the plug and terminated 36 committed aircraft lease agreements with delivery dates between ‘27 and ‘28, and also sent a notice of default on 37 existing aircraft leases.
CFO and first day declarant Fred Cromer, blames that for the filing:
“Concerned that the disclosure of these purported default notices by its biggest lessor could prompt other actions from other counterparties, including other aircraft lessors, Spirit concluded that it had no choice but to quickly seek the protections of chapter 11. While Spirit is continuing to have negotiations with AerCap to resolve these and other issues, it stands ready to litigate the validity of the notices and damages that Spirit has suffered as a result of AerCap’s actions.”
Four days! Quick turnaround. But plenty of time to make sure that he, Mr. Davis and others on management got taken care of (🖕):
Quite the payoff for Mr. Davis who has been on the job for just a little over four months.
But we digress. Going back to AerCap and the debtors’ other lessors, Mr. Huebner had choice words at the first-day hearing:
“… I wanna say the following with clarion clarity. Many of our lessors, and I'm guessing that many of them are listening, may well have a vested interest in offering us straight up liquidity or unusually attractive financing as part of the resolution of our relationship with them and our decisions as to which of their aircraft, if any, we keep and on what terms. That's so important, I'm gonna repeat it. Many of our lessors may have a vested interest in quickly offering us straight up liquidity or unusually attractive financing as part of the resolution of our relationship with them and which, if any, of their aircraft we keep and on what terms.”
Subtlety obviously ain’t on the menu. That’s because neither is DIP financing. For now, Spirit will attempt to tap into its >$275mm cash balance to finance the cases … but, as of writing (early AF on September 3), a motion hasn’t yet hit the docket.". It will and soon (if it hasn’t already by the time you read this): Judge Lane scheduled the hearing for tomorrow, September 4, 2025, at 11:30am ET.
While folks ponder ponying up to fund the cases, here’s the petition date debt stack which, in comparison to the chart just👆, shows the RCF draw:
But you should probably know the debtors have other issues. Back to Mr. Cromer:
“Spirit’s leased aircraft have a [non-balance sheet] embedded maintenance liability in excess of $1.0 billion— several hundred million of which relates to aircraft anticipated to be shed during these Chapter 11 Cases. In addition, only 157 of Spirit’s aircraft are available to fly as 38 are currently grounded due to [a] Pratt & Whitney powdered metal issue and an additional 19 are grounded because the Company is planning to sell them.”
The debtors have 41 additional impacted engines that will ground aircraft over the next two years.
In any event, Mr. Huebner intends to address all that:
“While unexpected circumstances compelled the company to act swiftly and decisively in the last week, Spirit is, as I said before, a spectacular candidate to deploy the tools of Chapter 11 to emerge stronger, healthier, and viable. Tools that intentionally, although admittedly with the benefit of 20/20 hindsight, possibly, unfortunately, went totally unused last year. For this will be a full operational restructuring in which no component of the business will go unexamined.”
Curious how the US trustee feels about the fastest chapter 22 in history? Here’s Shara Cornell to tell you:
“We have a lot of questions about the progression from Spirit 1.0 to Spirit 2.0, if you will. And while it isn't really up today, I just wanted to preview for the court some of the concerns. Most notably, that we have a lot of familiar faces here today. The same group that brought us Spirit 1.0 has now brought us Spirit 2.0, the fastest Chapter 22 in history. A critical and objective lens is going to be needed to examine how we got here. And I just wanted to preview that for Your Honor.”
We’re left with more questions than answers:
📍What does the debtors’ restructured fleet look like?
📍Will we get to see AerCap devolve into litigation?
📍Does Frontier Group Holdings Inc. ($ULCC), which previously made overtures towards Spirit, make another surprise appearance (there have already been recent talks)?
📍Will “dedicated customers of Spirit,” 🖕, abandon the airline in droves?
Mr. Huebner apparently thinks that last question is pure folly:
“I will leave you and all those listening with this. Despite the challenges currently facing Spirit, and not so parenthetically, many, if not all of its peers, Spirit's, quote, net promoter score, which measures its customers' likelihood to return to the airline, is higher in 2025 than it has ever been in the company's history. Spirit began offering new premium selections in August 2024 as part of a significant transformation to deliver a friendlier, more comfortable, and more cost-effective travel experience. And in June 2025, Spirit rebranded its value options to categories that include Spirit First, Premium Economy, and Valued, categories far more familiar to the traveling public. Moreover, during 2025, Spirit has risen to near the very top of the industry in officially reported on-time performance and other reliability metrics. We are currently third among all U.S. carriers in on-time performance behind only Hawaiian, who always basically wins because they fly where it's always hot and sunny, and Delta. We are ahead of every other U.S. carrier. This speaks volumes about Spirit and its 25,000 dedicated employees, and our current record-high customer satisfaction and on-time performance is a testament to Spirit's investment in building a friendly and flexible experience and a compelling value proposition for its customers. So to every single person listening to this hearing, try the evolving Spirit. Odds are you will like it a lot.”
“We”? Really? We’d love to see how many miles Mr. Huebner has racked up flying Spirit.
As noted above, parties will reconvene tomorrow, September 4, 2025, at 11:30am ET for a cash collateral hearing, and the second day hearing will follow on September 30, 2025 at 11am ET.
The debtors are represented yet again by Davis Polk & Wardwell LLP (“DPW”) (Marshall Huebner, Darren Klein, Christopher Robertson, Moshe Melcer, Noah Sosnick) as legal counsel, Debevoise & Plimpton LLP (“Debevoise”) (Jasmine Ball) as fleet counsel, Morris, Nichols, Arsht & Tunnell LLP (“MNAT”) as conflicts counsel, FTI Consulting, Inc ($FCN) (Marc Bilbao, Dan Wikel, Steven Strange, Dave Fowkes, Michael Paykin, Kris Hall) as financial advisor, and PJT Partners LP ($PJT) as investment banker. Notably, while DPW, Debevoise and MNAT are all repeat players, FCN and PJT weren’t involved in the first go-around. Hopefully the folks at Alvarez and Marsal North America, LLC and Perella Weinberg Partners LP ($PWP) enjoyed the holiday.
The Air Line Pilots Association is represented by Cohen, Weiss and Simon LLP (Richard Seltzer, Peter DeChiara, Melissa Woods, Matthew Stolz, Jeff Wang) as legal counsel. The Ad Hoc Committee of Secured Noteholders is yet again represented by Akin Gump Strauss Hauer & Feld LLP (Michael Stamer, Jason Rubin) as legal counsel. AerCap is represented by Pillsbury Winthrop Shaw Pittman LLP (Michael Burke) as legal counsel. A group of aircraft lessors is represented by Holland & Knight LLP (Barbra Parlin) as legal counsel. A different group of aircraft lessors is represented by Vedder Price PC (Michael Edelman) as legal counsel. The Association of Flight Attendants is represented by Parkins & Rubio LLP (Charles Rubio, Lenard Parkins) as legal counsel. U.S. Bank National Association is represented by Dorsey & Whitney, LLP (Samuel Kohn, Michael Galen) as legal counsel. Citibank, N.A. is represented by Milbank LLP (Andrew Harmeyer) as legal counsel.
*Wait, the first one doesn’t count? Do the fees the professionals were paid count? Perhaps Mr. Huebner and the other profs will gladly return the approximately $33mm in professional fees generated in that non-bankruptcy, yeah?
**The exit secured notes carry an interest rate of of either (i) 8% cash and 4% PIK or (ii) 11% cash. The exit secured notes mature on March 12, 2030 and were redeemable by March 12, 2027 at a 6% premium.
***That 8-K also disclosed that Spirit was contending with a minimum liquidity covenant on its credit card processing agreement with U.S. Bank National Association ($USB), and failure to comply would mean the processors could put a holdback on cash. At the end of 2Q’25, Spirit’s maximum holdback exposure was $491.6mm. But it entered into two amendments that transferred an additional $50mm into a pledged account in favor of USB and allows USB to (i) holdback up to $3mm per day until USB’s exposure is fully collateralized and (ii) remain fully collateralized as USB’s exposure increases or decreases. In exchange, USB extended the expiry date of the credit card processing agreement from December 31, 2025 to December 31, 2027, with two automatic one-year extensions. The minimum liquidity trigger for holdbacks was, of course, also removed. Net net, a sh*tload of liquidity got locked the f*ck up.
Company Professionals:
Legal: Davis Polk & Wardwell LLP (Marshall Huebner, Darren Klein, Christopher Robertson, Moshe Melcer, Noah Sosnick)
Fleet Counsel: Debevoise & Plimpton LLP (Jasmine Ball)
Conflicts Counsel: Morris, Nichols, Arsht & Tunnell LLP
Financial Advisor: FTI Consulting, Inc (Marc Bilbao, Dan Wikel, Steven Strange, Dave Fowkes, Michael Paykin, Kris Hall)
Investment Banker: PJT Partners
Claims Agent: Epiq (Click here for free docket access)
Other Parties in Interest:
Air Line Pilots Association
Legal: Cohen, Weiss and Simon LLP (Richard Seltzer, Peter DeChiara, Melissa Woods, Matthew Stolz, Jeff Wang)
Ad Hoc Committee of Secured Noteholders
Legal: Akin Gump Strauss Hauer & Feld LLP (Michael Stamer, Jason Rubin)
AerCap Holdings N.V.
Legal: Pillsbury Winthrop Shaw Pittman LLP (Michael Burke)
Group of Aircraft Lessors
Legal: Holland & Knight LLP (Barbra Parlin)
Association of Flight Attendants
Legal: Parkins & Rubio LLP (Charles Rubio, Lenard Parkins)
Group of Aircraft Lessors
Legal: Vedder Price PC (Michael Edelman)
U.S. Bank National Association
Legal: Dorsey & Whitney, LLP (Samuel Kohn, Michael Galen)
Revolving Credit Facility Agent: Citibank, N.A.
Legal: Milbank LLP (Andrew Harmeyer)