Spirit, the largest U.S. budget airline, announced Monday that it has filed for Chapter 11 bankruptcy protection. The company hopes to turn things around — and its new CFO will be front and center in that effort.
On the financial front, Spirit said it is working to restructure and reduce its debt, and that it has received backstop commitments from existing bondholders for a $350 million equity investment, and $795 million will complete a deleveraging transaction to equalize the funded debt of Bondholders are also providing $300 million in debt-possession financing.
Spirit has struggled to overcome the slowdown in travel caused by the pandemic. There was also a cynical attempt to sell the airline to JetBlue, which was blocked in federal court. Since the start of 2020, the airline has lost more than $2.5 billion and will face looming debt payments over the next year that will total more than $1 billion.
News of the Chapter 11 filing came after Spirit said last week it would not announce its quarterly financial results as the company focused on talks with bondholders to restructure its debt. Its CFO, Fred Cromer, started in the role on July 8. Cromer has worked in the aviation industry for 30 years, most recently as CEO, and previously at aviation technology company Xwing, Inc. was the CFO of He also served as CFO of ExpressJet Airlines.
“I think the priority now is the bankruptcy process, which is intended to buy time for the airline to try to improve its business results,” Nick Owens, an industry equity analyst at Morningstar, told me. ” Improving Spirit’s business results “will be very difficult and may require capacity reductions, including getting rid of some aircraft and perhaps reducing its workforce,” Owens said.
Spirit’s stock price is down about 98% from its all-time high. As a result of the Chapter 11 filing, the company said it expects to be delisted from the New York Stock Exchange in the near term. Spirit also expects to exit the bankruptcy process in the first quarter of 2025.
The start of holiday travel is just around the corner. And Spirit plans to operate its business “as usual” during the Chapter 11 process. According to the company, guests will still be able to use existing tickets, book flights, and credit and loyalty points as usual. Spirit also said the filing will not affect employees’ wages or benefits.
Airlines can usually emerge from bankruptcy, which provides an opportunity to renegotiate debt, leases and other contracts, Owens said. “In that case, it could still be an uphill battle for Soul as their business is suffering from lower airfares and higher-than-expected labor costs,” he said.
Cheryl Estrada
sheryl.estrada@fortune.com
The following sections of CFO Daily were produced by Greg McKenna..
Leaderboard
Ken Cook He was named CFO of The Wendy’s Company (Nasdaq: WEN), effective Dec. 2. Cook will replace Gunther Ploch, who has served as CFO since 2016 and will leave the company at the end of the year. Cook most recently served as head of financial planning and analysis at United Parcel Service (UPS). In prior roles at UPS, Cook served as CFO for the US Domestic segment, and previously held leadership roles in investor relations and treasury, and served as CFO for South Asia.
Michael Abrams NRx Pharmaceuticals, Inc. (Nasdaq: NRXP) was named CFO, a clinical-stage biopharmaceutical company. Abrams replaces interim CFO Richard Naredo, who will continue to support the company’s financial operations and other projects. Abrams has nearly three decades of experience as an executive officer, investment banker, director and senior advisor, including serving as CFO of Arc Therapeutics, Rise IT Solutions. and FitLife brands.
Big deal
Four in five finance chiefs (82%) believe their companies leave money on the table during negotiations, according to a new study. Survey From Icertis, a contract management software company. The company selected more than 1,000 C-suite executives at companies with more than 5,000 employees.
70% of CFOs identified cost increases due to inflation as the main source of revenue erosion, 40% said their companies Contracts are not taking advantage of price protection for inflation.
Not surprisingly, the report found that both CEOs and CFOs are highly focused on usability. Artificial intelligence. 64% of CEOs and 67% of CFOs said AI advances will be the most impactful development at their companies in the next 10 years, ahead of climate change and geopolitical instability.
Go deeper
“Welcome to Alvintown, USA: An Unexpected Texas Home for Musk’s Business Empire,” is a new. Report from good luckOf Jessica Matthews. As Austin emerged as one of the nation’s tech hubs, Bastrop County was experiencing population growth long before Musk made it home to his various businesses. Now, Matthews writes, there is one. A knot of excitement, wonder, doubt and dread about what’s to come.
Heard.
“I have this argument that college education has to grow faster because we can’t be afraid to have our kids interact with technology. Because the first day they actually start doing a real job, getting them to interact with technology. has to
-Krish Venkataraman, president of software firm Dataco, said during a discussion at the Fortune Global Forum.
