Spirit Airlines seeks approval to make retention payments as it ends operations

WASHINGTON, May 4 (Reuters) – Bankrupt discount carrier Spirit Airlines, which ceased operations on Saturday, asked a U.S. bankruptcy court for approval to pay retention bonuses to remaining employees and said it had no choice but to end operations.

Spirit is seeking court approval to pay $10.7 million in retention bonuses to employees who remain as the company ends operations — averaging $76,000 per participant — and will pay more to the top three executives but has not yet disclosed how much.

“Having fought valiantly for months to reorganize, and having all but succeeded, (Spirit is) left with no alternative to an orderly wind-down of operation,” Chief Financial Officer Fred Comer said on Monday in a court filing.

“There are no longer any viable paths to a restructuring or continued operations.”

Spirit said the payments to the top three executives will replace some of the payments it would have offered the senior executives under annual incentive and cash incentive plans in place before the bankruptcy.

Bondholders may challenge Spirit’s management bonuses, as some aspects of the wind-down plan, such as how liquidation proceeds and cost savings will be measured, are still being negotiated with the debtor-in-possession lenders, according to a separate filing.

The airline said it will retain about 150 employees before decreasing its headcount to about 40 after the first three months, with expectations that its liquidation plan will be completed within that time frame.

Spirit says it does not have money to conduct an organized auction of its aircraft, engines and other equipment, and is asking the court for permission for fast sales or to abandon and let the lenders repossess.

The carrier had been in advanced talks with the Trump administration over a $500 million government bailout that would have helped it exit bankruptcy and granted the government up to 90% of Spirit’s equity. Those talks collapsed after some creditors objected.

Global carriers are contending with surging jet fuel prices since the U.S.-Israeli strikes on Iran disrupted traffic through the Strait of Hormuz, in the air travel industry’s worst crisis since the COVID-19 pandemic. Spirit was already struggling to turn a profit before the fuel shock and has faced $100 million in incremental fuel costs since March 1.

“The material additional costs to Spirit proved to be too much for its available liquidity to absorb,” Spirit said.

(Reporting by David Shepardson in Washington and Dietrich Knauth and Doyinsola Oladipo in New York; Editing by Nick Zieminski and Bill Berkrot)