With Spirit Airlines filing for bankruptcy, there are going to be some losers in this process. The key question is how does this impact you?
Stockholders
For stockholders of Spirit Airlines, they will in all likelihood be wiped out. So, this will be a bad investment. Stockholders will be the ultimate losers in this process.
Passengers
For those people who will plan to fly on Spirit Airlines in the near future, Spirit has announced that it will continue to operate as an airline. So, this means that if you have purchased tickets, Spirit will honor these tickets for the foreseeable future. As time progresses, that may change if Spirit Airlines and the creditors decide to either liquidate or sell the airline, ticketholders may be left out in the cold if they shut down the airlines.
Also, if Spirit Airlines cease flying as an independent airline, all passengers will be adversely affected. Other airlines will be inclined to increase prices with the loss of one of the biggest discount airlines.
Free Spirit Loyalty Program
Similar to the impacts on passengers, members of Spirit Airline’s loyalty program, Free Spirit, will not have any immediate impacts since Spirit Airlines will try to operate as it proceeds during its bankruptcy. If it just restructures it debt then there is a good chance that the loyalty program will remain relatively unaffected. If they liquidate Spirit Airlines, the loyalty program will be wound down. If Spirit Airlines is sold to another airline, it may get interested. Normally the buying airline will convert the Spirit loyalty program (usually at less favorable terms). But the loyalty members may end up in a good position if the buying airline has a good loyalty program.
Employees
For the time being, no real changes will be made to the Spirit Airline workforce. As they finalize the bankruptcy plan, Spirit Airlines will in all probabilities plan some efficiencies to improve their financials. As part of the plan, Spirit Airlines may eliminate some less profitable business which also will impacts its workforce. I would not be surprised if this results in some layoffs across the company.
Winners
Are there any potential winners in the bankruptcy proceedings? Possibly. Some senior employees will receive retention bonuses and plans to ensure that the airline will continue to operate and plan. If this is structured well, senior employees can do very well.
Also, bond holders and debt holders may initially not received full payment. If Spirit Airlines profits post-bankruptcy, these holders can end up making more money than anyone else in the process.