A Spirit Airlines Airbus A320 taxis at Los Angeles International Airport after arriving from Boston on September 1, 2024 in Los Angeles, California.\u00a0<\/p>\n
Kevin Carter | Getty Images News | Getty Images<\/p>\n
Spirit Airlines is in talks with alternative investment firm Castlelake for a potential takeover as the discount airline looks for a path out of bankruptcy<\/a>, CNBC has learned.<\/p>\n Spirit filed for Chapter 11 bankruptcy protection<\/a> last August for the second time in a year after its previous turnaround plan fell flat<\/a>. <\/p>\n Fellow budget carrier Frontier Airlines<\/a> had been in talks<\/a> with Spirit over the years for a potential merger, including in recent months, but didn’t secure a deal, according to people familiar with the matter, who requested anonymity to speak about the discussions. The two had reached a deal\u00a0four years ago<\/a>\u00a0but it was called off after a surprise all-cash offer<\/a> from JetBlue Airways<\/a>.<\/p>\n Spirit and Castlelake didn’t immediately respond to requests for comment. <\/p>\n It was not immediately clear if Spirit’s bondholders and Castlelake would reach a deal or what form it could take. Minneapolis-based Castlelake has been active for years in aviation finance. In August, it announced it was launching a new aviation lending arm, Merit AirFinance, with $1.8 billion in deployable capital. <\/p>\n Spirit in mid-December said it amended its agreement with creditors to receive another $50 million in funding immediately, a lifeline for the carrier. Further funding would be contingent on “further progress on a standalone plan of reorganization or a strategic transaction,” Spirit said<\/a> Dec. 15. “Spirit is currently in active negotiations on each of these possibilities,” the company added.<\/p>\n In its fight for survival, Spirit has slashed flights<\/a>, reduced its fleet and cut jobs to save money. Unions last year agreed to pay cuts for the carrier’s pilots and flight attendants. That amounted to $100 million in concessions, the Air Line Pilots Association said in a Jan. 13 open letter, urging bondholders to support Spirit’s restructuring and avoid a liquidation.<\/p>\n Dania Beach, Florida-based Spirit for years enjoyed largely steady profitability and enviable margins in the often-rocky airline industry. But things took a turn after the pandemic, when wages and other costs soared, customer preferences<\/a> changed, and an oversupply of domestic flights drove down airfare<\/a>. That was especially punishing for U.S.-focused carriers that don’t enjoy a buffer from plush first-class cabins and large credit card and loyalty program deals.<\/p>\n The carrier’s problems snowballed after a Pratt & Whitney<\/a>\u00a0engine recall grounded dozens of its Airbus aircraft starting in 2023 and the planned acquisition by JetBlue was blocked two years ago by a federal judge who ruled it was anticompetitive, leaving both carriers to fend for themselves against a backdrop where larger carriers dominate.<\/p>\n