US low-cost carrier Spirit Airlines has applied for "voluntary prearranged" Chapter 11 bankruptcy protection in New York as it seeks to stabilise its debt position. Disclosing the application, Spirit says it has entered into a restructuring support agreement backed by bondholders and designed to help it to reduce its debt and "provide increased financial flexibility", enabling a return to financial health. Included in this agreement are backstopped commitments for a $350 million equity injection from existing bondholders. The airline will also turn $795 million of debt into equity, as part of its efforts to deleverage. Bondholders will also provide $300 million in debtor-in-possession financing, which, combined with existing liquidity, will support Spirit through the Chapter 11 process. The Miramar, Florida-based airline envisages flying as normal through the period, with all suppliers, including aircraft lessors and holders of secured aircraft indebtedness, being paid as normal. "I am pleased we have reached an agreement with a supermajority of both our loyalty and convertible bondholders on a comprehensive recapitalisation of the company, which is a strong vote of confidence in Spirit and our long-term plan," states Ted Christie, Spirit's chief executive. "This set of transactions will materially strengthen our balance sheet and position Spirit for the future while we continue executing on our strategic initiatives to transform our guest experience, providing new enhanced travel options, greater value and increased flexibility." As part of the Chapter 11 process, Spirit is filing a reorganisation plan that will incorporate the restructuring support agreement and be confirmed by the courts. Spirit expects that its shares will be cancelled with no value through the restructuring, with the airline removed from the New York Stock Exchange, although its common stock should continue to trade in the over-the-counter marketplace.

Boeing has this week notified employees it plans to lay off as part of what it says is an adjustment of its "workforce levels to align with our financial reality and a more focused set of priorities". "We are committed to ensuring our employees have support during this challenging time," Boeing adds, with most employees that have received notifications set to exit the company in mid-January. According to the US Department of Labor, the Worker Adjustment and Retraining Notification Act (WARN) requires most employers with 100 or more employees to provide notification 60 calendar days in advance of "plant closings and mass layoffs". Boeing announced on 11 October that it would reduce its workforce by approximately 10%. Eligible employees will receive severance pay, career transition services, and subsidised health care benefits up to three months after exiting the company. "Reductions include attrition and concentrating backfills for open positions on business-critical priorities," Boeing says.

Low-cost airlines in the USA are being squeezed by heightened competition from legacy carriers that threatens the viability of their business models, warns Alex Cruz, vice-chair of Canada's WestJet. Speaking to the Future Skies podcast from insurer AIG, former British Airways chief Cruz observed that the performance of many US low-cost carriers, specifically Frontier and Spirit Airlines, had "taken a turn" since the pandemic and that they were "not really delivering the results that would be expected of them". He attributes this to issues with their cost structures, but also pressure from legacy airlines which have "come up with products that are very, very competitive". He cites the popularity of "super-basic" fares that enable customers to stay within legacy airlines' ecosystems and frequent-flyer programmes. Such changes in the airline market have "been interesting to [watch] develop", he comments, adding: "There are question marks about all the [low cost] airlines that are within that segment, and fewer questions about the long-term strategies of the legacy airlines." Cruz's remarks echo those of Breeze Airways founder David Neeleman, who in early October said that ultra-low-cost carriers in the USA were being forced to dramatically reshape their business models as the country's largest airlines had "figured out how to deal with them", likewise citing problems faced by Spirit and Frontier, plus JetBlue. "The ultra-low-cost carriers thought that if they just got bigger and bigger planes and they drove down their cost enough that the big guys could never compete with them," Neeleman said at an industry event in Amsterdam. "But then the big guys said: 'Well, if I got bigger [aircraft] my incremental costs on that airplane cost less than [ULCC's]. And with all the benefits I have with frequent-flyer and credit card and all of that, nobody will fly [ULCCs] if they can fly with me.'" He described this "restructuring" as having left many ULCCs without a clear business model that protected them from their larger competitors. Spirit said in recent days that it was unable to file a quarterly earnings report and "exploring strategic alternatives and other ways to improve liquidity". As for US low-cost carriers' European peers, Cruz said he "couldn't possibly critique" their performance given their competitiveness post-Covid. Ryanair is performing strongly, he notes, while EasyJet has successfully branched out into package holidays and Wizz Air has continued to expand, "and there is little doubt they are going to continue looking at ways to grow". Meanwhile, the three main European legacy airline groups have exceeded expectations post-pandemic, he believes, having generally underperformed them prior to 2020. In part, this success has driven demand for premium leisure travel. "The [airline] landscape in Europe seems slightly more stable [than the USA], and it would be difficult to question the low-cost model," says Cruz. "I'm confident the [expanding] supply of airline seats [in Europe] will continue."