Court filings by Spirit Airlines reveal that unexpected lease termination notices from major aircraft lessor AerCap played a pivotal role in precipitating the latest crisis, causing the Florida-based ultra-low-cost carrier, has plunged back into Chapter 11 bankruptcy protection just five months after emerging from its previous restructuring,.
The airline, which operates a fleet of over 150 Airbus aircraft and serves destinations across the United States, the Caribbean, and Latin America, filed its voluntary petition in the United States Bankruptcy Court for the Southern District of New York on 29 August 2025, citing the AerCap dispute as a critical trigger that left it with no alternative but to seek immediate legal shelter to avert a potential cascade of defaults from other creditors.
The saga began to unravel on 25 August 2025, when AerCap, the world’s largest aircraft leasing company and a key partner to Spirit, issued two stark notices without prior warning. The first terminated lease agreements for 36 Airbus A320neo family aircraft slated for delivery in 2027 and 2028, which Spirit had anticipated would bolster its fleet expansion amid ongoing recovery efforts from the post-pandemic travel slump.
The second notice declared events of default on leases for 37 aircraft already in operation, representing approximately a quarter of Spirit’s current fleet of 158 planes.
According to a sworn declaration by Spirit’s chief financial officer, Fred Cromer, filed with the court, the airline maintains it was in full compliance with all obligations, including timely payments, and views AerCap’s actions as “extraordinary” and unsupported by evidence.
“Spirit disagrees that any termination right or event of default existed under any of these leases, and disputes the validity of the notices,” Cromer stated, acknowledging that the public disclosure of these claims risked prompting similar moves from other lessors, thereby threatening the airline’s entire operational stability.
Swift and sobering
This second bankruptcy filing marks a swift and sobering reversal for Spirit, which had only exited its initial Chapter 11 process in March 2025 after a reorganisation that converted €735m (equivalent to $795m) of debt into equity and secured €323m ($350m) in fresh investment from bondholders. That earlier restructuring, initiated in November 2024 amid mounting losses exceeding €1.85bn ($2bn) over five years, was intended to slash debt and inject capital, but industry analysts now argue it fell short of addressing deeper structural woes, including a bloated cost base where operating expenses hit €1.11bn ($1.2bn) in the latest quarter – 118pc of revenue – and persistent challenges from Pratt & Whitney engine recalls that have grounded dozens of aircraft.
Spirit’s president and chief executive, Dave Davis, acknowledged in a statement that while the first filing focused narrowly on debt reduction, “it has become clear that there is much more work to be done,” with the Chapter 11 process now offering “tools, time, and flexibility” to negotiate with lessors like AerCap and overhaul the business model.
As of 3 September 2025, the situation remains fluid but precarious for Spirit, which received US court approval just days after filing to continue normal operations, ensuring flights, ticket sales, and loyalty programmes proceed uninterrupted. The airline has reassured passengers and employees that wages, benefits, and vendor contracts will be honoured, with no immediate flight cancellations planned.
Cromer’s declaration hints at an intensifying legal standoff, as Spirit “stands ready to litigate the validity of the notices and damages that Spirit has suffered as a result of AerCap’s actions” if negotiations falter. AerCap, which in July 2024 acquired 36 delivery positions from Spirit’s Airbus order book in a deal providing €172m ($186m) in immediate relief, has not publicly commented on the dispute, but sources suggest the lessor is already approaching rivals like Frontier Airlines to reallocate the affected aircraft, potentially accelerating industry consolidation.
Weak domestic demand
Spirit’s woes extend beyond the AerCap revelation, rooted in a perfect storm of external pressures that have eroded its ultra-low-cost edge. The carrier reported a net loss of €227m ($246m) in the three months to June 2025, exacerbated by weak domestic leisure demand, elevated capacity in key markets like Las Vegas – where visitor numbers dropped 11 per cent in June – and aggressive pricing from larger competitors such as American, Delta, and United, who have co-opted Spirit’s bare-bones fare model with their own basic economy offerings.
Efforts to pivot towards premium leisure travel, including tiered pricing with added perks, have yet to yield significant gains, while ongoing engine issues from Pratt & Whitney’s geared turbofan recalls are projected to sideline up to 67 aircraft by year-end, costingms in lost revenue. To stem the bleed, Spirit has already furloughed hundreds of pilots, sold 23 older Airbus planes for cash, and drawn down its full €254m ($275m) revolving credit facility, but these measures have proven insufficient against a debt pile still hovering around €3.7bn ($4bn).
The implications for the broader aviation market are profound, particularly for budget-conscious travellers who have relied on Spirit to discipline fares and provide affordable access to over 80 destinations.
With shares in Spirit’s parent company, Spirit Aviation Holdings, plummeting 45pc p to €0.61 ($0.66) in after-hours trading following the filing – and down over 87pc in the past month – analysts predict rivals could snap up undervalued assets, including the young fleet and route rights, further reducing low-cost options and potentially driving up ticket prices by up to 10-15 per cent on affected routes.
Frontier, Spirit’s closest competitor, has already expanded into 20 new markets overlapping with Spirit’s network, while larger carriers eye opportunities to absorb grounded planes. Labour unions, including the Association of Flight Attendants, have urged members to “prepare for all possible scenarios,” warning of deeper cuts ahead, though Spirit insists it remains committed to its 12,800 employees.
75pc risk of Chapter 7
As Spirit navigates this second bankruptcy, the AerCap lease notices stand as a stark “revelation” of how fragile its recovery was, underscoring the perils of over-reliance on leased fleets in a high-interest environment. The airline aims to emerge leaner by redesigning its network around focus cities like Fort Lauderdale, shrinking its fleet to match demand, and generating hundreds ofms in annual savings through reduced lease and debt obligations.
Yet, with a 75pc risk of conversion to Chapter 7 liquidation cited in some analyses, and pre-delivery payment providers like AerCap facing exposure on €105m ($113.5m) in balances, the path to viability remains fraught. For now, Spirit continues to fly, but the turbulence shows no sign of abating, leaving passengers, investors, and the industry bracing for what could be a defining moment in the evolution of low-cost air travel.
