Spirit Airlines in bankruptcy: What consumers should know about booking flights

For years, its bright-yellow planes have been a staple at airports near beaches, theme parks and the Strip in Las Vegas — and a vessel for price-conscious customers to fly on a budget.

But with the holiday season now just weeks away, there are real concerns about the future of Spirit Airlines.

In late August, the ultra-low-cost carrier entered Chapter 11 bankruptcy for the second time in less than a year.

The company will keep operating while it reorganizes and restructures, and has voiced confidence in its path forward.

But some industry analysts and financial experts fear the airline faces a gloomier financial outlook than any major U.S. airline has in decades.

"It's pretty much a negative picture for them," said former airline executive Ahmed Abdelghany, associate dean at Embry-Riddle Aeronautical University. "They lost a lot of confidence from the consumer."

Recent weeks have seen Spirit pull out of cities it serves, slash routes and furlough flight attendants, all while trying to reassure consumers with new credit card perks, bonus points and its hallmark discounted fares.

Now, with Thanksgiving and Christmas bookings in full swing, how consumers respond may be the ultimate test — and questions abound.

If you book on Spirit, will the flight take off? Will travelers get a refund if their flight gets cut? And what will Spirit's woes mean for travelers, whether they fly with the discounter or not?

We'll try and answer as many questions as we can.

What happened to Spirit Airlines?

Think of Spirit's problems as a perfect storm, of sorts.

In the wake of the coronavirus pandemic, the entire U.S. low-cost airline industry has faced its challenges: Consumers have flocked to large network carriers, with their lie-flat seats, robust loyalty programs and long-haul flights.

But Spirit has also faced mounting debt, a failed merger attempt and — in a problem beyond its control — engine problems that grounded many of its planes.

And its financial outlook only grew more dire after the Dania Beach, Florida-based carrier emerged from its first bankruptcy this spring, as consumers tightened up spending and lower fares cut into airlines' profits.

Spirit reentered Chapter 11 on Aug. 29, but not before executives shared "substantial doubt" in a federal filing (PDF link) about its ability to keep operating if its outlook didn't improve.

What do Spirit's woes mean for consumers?

That brings us to the million-dollar question: Is it risky to book a flight on Spirit if you're planning a vacation or holiday flight home?

It's complicated.

Business as usual — for now

On one hand, if you went to the airport for a Spirit flight today, you probably wouldn't notice anything unusual.

"I think as a consumer, you should feel relatively safe," said Chris Anderson, who studies the airline industry from his faculty post at Cornell University's SC Johnson College of Business.

Smaller network

"At the same time," Anderson added, "There's going to be a lot of ... uncertainty or volatility in their network."

Meaning, flight cuts.

As of Oct. 6, Spirit was set to operate 28% fewer flights in the fourth quarter than it did a year ago, according to data from aviation analytics firm Cirium.

OK ... so are holiday flights safe?

Chances are, if your flight has already been canceled, you probably already know about it — and are due a refund.

Also, while Spirit did announce 40 planned route cuts last week, executives said the company did not plan to exit any more cities in the near future.

While nothing is guaranteed, that could bode well for customers eyeing Spirit flights between now and the end of the year.

Could Spirit shut down in 2026?

In the long term, there remain plenty of questions.

Last week, Spirit celebrated a "significant step" toward stabilizing the company, inking a deal with the Irish company that leases many of its planes.

Before that deal, however, analysts at Raymond James considered it "highly likely" that Spirit could be forced into Chapter 7 liquidation by early 2026.

In that scenario, the airline would likely cease operations altogether, perhaps grounding planes abruptly.

That risk has been reduced by last week's deal, industry analyst Savanthi Syth told TPG.

But "how long this buys Spirit, and its ability to survive," she said, will hinge on the airline striking additional deals with its unions and partners.

"I think it is highly probable," Syth added, "that Spirit is significantly smaller at the end of this process."

To that end, Spirit on Friday said it would get rid of more than 100 aircraft in a move expected to save the company hundreds of millions of dollars annually.

What to know if you're booking Spirit Airlines flights

However this turns out, there are some things travelers should know.

DOT refund rules

If you book a Spirit flight and it gets canceled — whatever the reason — you should still have protections in place.

For starters, U.S. Department of Transportation rules guarantee timely refunds to customers when an airline cancels their flight.

And Anderson, of Cornell, believes travelers who book Spirit tickets would get their money back — even if the airline's finances someday led to a worst-case-scenario shuttering of operations.

"I think consumers would get made whole," he said. "I think that we have the checks and balances in place."

Read more: Getting a refund for a canceled or delayed flight: What to know in 2025

Should Spirit customers buy travel insurance?

What about a travel insurance plan, to be extra safe? After all, some plans cover financial default by an airline.

New bookings likely wouldn't be eligible for that coverage, said Chrissy Valdez, senior director of operations at insurance marketplace Squaremouth.

That's because Spirit's bankruptcy would probably count, at this point, as a "known event," akin to a preexisting condition.

Travel credit cards with insurance

However, savvy travelers with a credit card that has built-in travel insurance might have better luck — as long as they use that card to book their trip.

"Many credit cards with built-in travel protections contain trip cancellation and interruption coverage, and sometimes may cover financial insolvency or default of a travel provider," Valdez said, while cautioning that each policy is different.

Here are some of our favorite credit cards with travel insurance.

Read more: Should you get travel insurance if you have credit card protection?

Book with a credit card, regardless

In any case, we recommend booking Spirit flights (and all flights, actually) with a credit card, and not just to earn points.

If all other refund efforts fail, federal law could be on your side.

The Fair Credit Billing Act gives consumers the right to dispute credit card charges for services paid for but not rendered — so this could be a backup way to recover money paid for a flight that doesn't take off.

What about Free Spirit points?

Technically, airlines control their frequent flyer rewards, and if the airline were to liquidate, the points would likely cease to exist along with the carrier.

However, that wouldn't preclude a competitor stepping in to try to win customers who had flown with Spirit.

It's possible we could see other airlines offer points or status matches to Free Spirit loyalists — something top competitor Frontier Airlines already dabbled in — but there would be plenty of uncertainty in this area.

What a smaller Spirit could mean for airfare

You don't have to be a frequent Spirit flyer to feel the impact of the carrier becoming a smaller player at airports across the country.

"Even if you never fly Spirit, you owe them a debt of gratitude for cheaper fares on the airlines you do fly," said Scott Keyes, founder and chief flight expert at Going, noting research that shows competitor airlines have historically dropped prices by an average of 19% on routes Spirit launched.

"In a world without Spirit, Delta can get people to pay $300 or more for a flight from New York City to Miami," Keyes said. "But when Spirit offers the same route for $49, it forces Delta to drop their fares or risk losing customers."

Related reading:

• When is the best time to book flights for the cheapest airfare?
• The best airline credit cards
• What exactly are airline miles, anyway?
• 6 real-life strategies you can use when your flight is canceled or delayed
• Maximize your airfare: The best credit cards for booking flights
• The best credit cards to reach elite status
• What are points and miles worth? TPG's monthly valuations