Ultra-low-cost carrier Spirit is facing mounting hurdles in its effort to fully rebound from bankruptcy and may be worse positioned than it was 10 months ago when it first filed for Chapter 11 protection.
Rating business Moody’s downgraded the airline’s credit rating by two notches to Caa3 on Friday, citing “higher than expected cash burn” compared to its previous forecast when Spirit emerged from bankruptcy in March.
“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,” Moody’s analysts wrote.
The downgrade came hours after the carrier borrowed the entire $275 million available under a revolving credit facility administered by Citibank. The credit facility was set up as part of Spirit’s bankruptcy restructuring.
Also this week, CNBC reported that aircraft lessors are contacting other airlines to gauge their interest in potentially acquiring some of Spirit’s aircraft. The news outlet cited people with knowledge of the discussions.
Spirit has furloughed about 500 pilots and is in the process of selling 23 Airbus A320 and A321 aircraft. It is also looking at selling off real estate and cutting other fixed costs.
‘Substantial Doubt’
Earlier this month, the airline warned investors that it may not survive the year as a going concern if it doesn’t raise more cash.
“The Company has continued to be affected by adverse market conditions, including elevated domestic capacity and continued weak demand for domestic leisure travel in the second quarter of 2025, resulting in a challenging pricing environment,” the carrier wrote in its second-quarter earnings report.
It reported a net loss of $245.8 million for the period, building on a loss of $143 million during Q1.
“Because of the uncertainty of successfully completing the initiatives to comply with the minimum liquidity covenants and of the outcome of discussions with Company stakeholders, management has concluded there is substantial doubt as to the Company’s ability to continue as a going concern within 12 months from the date these financial statements are issued,” the filing stated.
In a letter to employees, Spirit President and CEO Dave Davis clarified that the seemingly dire language is “required by our outside auditors to convey that there is risk if we do not make changes. But, we are.”
The airline has adjusted some of its customer-facing products in recent months in a bid to become the “premium” of budget carriers. It now offers larger seating and extra legroom for a fee, and is in the process of rolling out other perks, like the Free Spirit Debit Card.
Still, analysts say it’s becoming increasingly difficult to see how Spirit will regain its footing, especially as demand cools after the summer travel season.
A number of industry experts who spoke with CNBC said Spirit avoided making hard decisions during bankruptcy protection, like renegotiating aircraft leases or scaling back operations.
“It made it that much more unlikely for them to succeed without having tackled some of those issues,” Joe Rohlena, an airline analyst at Fitch Ratings, told the news outlet.
Fitch downgraded Spirit last week.
