Potential Spirit Airlines liquidation would be a 'gut punch': What experts want travelers to know

Spirit Airlines is facing turbulence amid rising jet fuel costs and navigating financial restructuring that, combined, could reportedly lead to even bigger issues for the budget carrier.

Bloomberg first reported on Wednesday that the Florida-based ultra-low cost airline could liquidate in the coming days, citing multiple sources with knowledge of the situation.

In a statement to ABC News, Spirit Airlines said the company "[does not] comment on market rumors and speculation."

Katy Nastro, a travel expert with the airfare monitoring site Going, told ABC News, there is "no way of knowing when and if an airline will liquidate, leaving customers stranded."

However, she added that "it's been no secret that Spirit has been struggling in the last few years coming out of the pandemic."

What to know about Spirit Airlines reportedly liquidating: Key factors, what could happen next

Amid speculation about Spirit Airlines' future, industry experts are weighing in on the carrier's current state and the scope of its existing issues, as well as what hangs in the balance for the company and its travelers.

Ben Mutzabaugh, senior managing editor for aviation at The Points Guy, explained that it's "relatively rare to see an airline liquidate," but the hurdles of successive bankruptcy filings and soaring jet fuel costs may have pushed Spirit to a point where "there's not much more corrective action they can do -- they are up against the wall."

"If it does happen, it just means one morning we're gonna see that Spirit is literally out of its last dollar and can't fund its operations and put an 'out of business' sign on the proverbial door," Mutzabaugh said.

2nd Spirit Airlines bankruptcy, increasing fuel prices a 'recipe for disaster'

Spirit filed for bankruptcy for the second time last August -- having previously filed for Chapter 11 bankruptcy protection in November 2024 -- to restructure financially and "reduce its cost structure," with hopes of emerging from Chapter 11 by the spring or summer of 2026.

Spirit recently announced its debt and lease obligations were "expected to be reduced from $7.4 billion pre-filing to approximately $2 billion post-emergence."

"It's never a good sign to file bankruptcy to begin with, but a second within six months, even worse," Nastro said. "Spirit suggested that they were going to be able to come out of bankruptcy this time by the spring. We're in the spring now, we have higher jet fuel prices -- this is a recipe for disaster for them."

Mutzabaugh said it's easy to predict that Spirit is at risk with "what the filings have allowed us to know about the carrier's finances."

"They had a plan to get back to profitability, and maybe it would have worked if they had more time -- but they're out of time, clearly, as far as fuel prices are concerned."

Amid the ongoing conflict in the Middle East, the soaring price of jet fuel has had widespread impact on airlines across the industry, with many turning to strategies such as increasing airfare prices or bag fees to help cover their margins.

"Think of it as a cliff: If Spirit knew they had 10 months until they hit this cliff before they ran out of money, if fuel prices go up 40%, suddenly that cliff gets a lot closer," Mutzabaugh explained. "For Spirit, certainly you would expect this to exacerbate their situation."

He added that while Spirit is facing a dire situation now, "if fuel prices stay high for a long time," it could push other small carriers close to the edge too.

What happens to Spirit's assets like plane fleets and airline gates if the airline liquidates?

If Spirit liquidates, Mutzabaugh said, "the planes will be shopped on the market, and obviously the court that handles that will look for the highest bidder to return as much to creditors as possible."

With other airline competitors interested in quickly expanding their own fleets, especially U.S. carriers that operate Airbus models, Mutzabaugh said we could see "a fairly robust market."

That money could then be paid back to "airports whose gate leases haven't been paid in a while."

Additionally, Mutzabaugh said that "Spirit's gates in Fort Lauderdale are considered very, very valuable -- the airport certainly will be interested in leasing them to a different carrier."

Once the landing rights are vacated at "any other airport that Spirit flies into," he said, "certainly other airlines will be interested in those."

"It'll be in high demand," he said.

What happens to your tickets and air travel plans if Spirit liquidates?

If Spirit liquidates, fulfilling future travel will be out the window, both experts said. And while it may be a more nuanced refund process, there are still some things consumers can do to try to recoup any losses for ticket purchases.

First and foremost, if Spirit liquidates, Nastro said anyone with a flight booked should "not cancel outright, because then you forfeit your right to a refund if there's still some money left over to be able to do so."

"A credit card won't be able give you anything back if you outrightly cancel and then try to call later," she explained.

Mutzabaugh said that while there aren't a lot of protections in place for customers with future travel if Spirit goes out of business, those "best suited to get their money back are people who have booked with a credit card."

"Typically there is a provision on most credit cards that they will honor that says if you have paid for services that weren't rendered, then the company will charge back the money to you and at least make you whole for that part of it," he said.

For those with travel insurance on a previously purchased Spirit ticket, Mutzabaugh said getting your money back "really depends on the fine print of your policy."

What a Spirit Airlines liquidation would mean for other carriers and competition

"Not having spirit in the market completely is a big, big gut punch to cheaper travel," Nastro said. "The single biggest reason why we see cheaper flights on any given route, especially lower cost carrier, is competition. And even if Spirit combined [with another carrier], that would not be great for competition, but at least it would be better than them not existing at all."

Nastro added that a potential closure could have an impact on prices throughout the rest of the year for a wide array of travelers.

"The biggest impact is going to be on the average traveler that travels once or twice a year that maybe is located in a Spirit hub. They're going to feel the most pain, but the market overall will feel pain for sure," Nastro said.