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Spirit Airlines Eyes Lifeline: Castlelake in Talks for Potential Takeover Amid Bankruptcy Battle
Dania Beach, FL – Spirit Airlines, the beleaguered discount carrier, is reportedly in discussions with alternative investment firm Castlelake for a potential takeover, as it desperately seeks a path out of its current Chapter 11 bankruptcy. This development, learned by CNBC, comes as Spirit navigates its second bankruptcy filing in a year, following the failure of a previous turnaround strategy.
A Spirit spokesman declined to comment on the ongoing “market rumors and speculation,” and Castlelake has yet to respond to requests for comment. The specifics of a potential deal between Spirit’s bondholders and Castlelake, or its ultimate form, remain unclear. Minneapolis-based Castlelake has a long-standing presence in aviation finance, having launched Merit AirFinance, a new aviation lending arm with $1.8 billion in deployable capital, in August.
Spirit received a crucial $50 million funding injection in mid-December after amending its agreement with creditors. Further funding is contingent on “further progress on a standalone plan of reorganization or a strategic transaction,” as the company stated on December 15th, adding that it is “currently in active negotiations on each of these possibilities.”
The airline has been fighting for survival by implementing significant cost-cutting measures, including slashing flights, reducing its fleet, and cutting jobs. Unionized pilots and flight attendants agreed to pay cuts last year, amounting to $100 million in concessions, according to a January 13th open letter from the Air Line Pilots Association, which urged bondholders to support Spirit’s restructuring and prevent liquidation.
For years, Spirit enjoyed consistent profitability and impressive margins within the often-volatile airline industry. However, the post-pandemic landscape brought a dramatic shift.
Soaring wages and operational costs, evolving customer preferences, and an oversupply of domestic flights led to a significant drop in airfare. This proved particularly damaging for U.S.-focused carriers like Spirit, which lack the buffer provided by lucrative first-class cabins and substantial credit card and loyalty program partnerships enjoyed by larger airlines.
The carrier’s struggles intensified with a Pratt & Whitney engine recall in 2023, which grounded dozens of its Airbus aircraft. Further compounding its woes was the federal judge’s decision two years ago to block its planned acquisition by JetBlue, ruling it anticompetitive. This left both carriers to contend independently in a market increasingly dominated by larger rivals.
In an effort to attract higher-spending customers and better compete with larger airlines whose profits have been bolstered by premium travelers post-pandemic, Spirit has been experimenting with offerings like roomier seats and bundled fares that include seat assignments, baggage, or change flexibility.