Spirit bankruptcy: How it will impact Detroit Metro Airport

DETROIT (FOX 2) - Spirit Airlines filed for Chapter 11 bankruptcy protection on Monday due to mounting losses and debt – and two failed mergers.

Spirit announced it was filing for Chapter 11 bankruptcy just a few days after a deal with Frontier Airlines fell apart. Earlier this year, Spirit had been in negotiations to merge with JetBlue – a deal that never materialized.

In October, Spirit announced plans to sell multiple aircraft and lay off workers as it tried to raise cash and revive operations.

President and CEO Ted Christie said on Monday that the airline has entered into an agreement with its bondholders that is expected to reduce the company's total debt and provide increased financial flexibility.

"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," Christie said in a news release. "I'm extremely proud of the Spirit team's hard work and dedication, which is key to our sustained progress in advancing our business and delivering for our guests."

Detroit is one of Spirits largest hubs with flights to 20 destinations including Atlanta, Cancun, Dallas, Las Vegas, and more. 

How will Spirit Airlines' bankruptcy affect holiday travel?

The good news is that if you have tickets booked – you should be fine.

The bankruptcy filing comes just a few weeks before the busy holiday travel season – with up to 6 million people expected to fly commercial airlines over Thanksgiving weekend. But the bankruptcy will not likely affect those flights. 

Most flights will operate as scheduled in the short term. But that doesn't mean you're guaranteed to be safe.

Will Spirit's bankruptcy cause flight cancelations?

Nerdwallet dove into the questions that fliers may need to know and the answer to this question is – maybe.

If you have a flight booked, keep an eye on the times and details.

An airline filing for bankruptcy does not mean your flight is canceled. Under Chapter 11 bankruptcy rules (which we'll line out below), Spirit is able to restructure debt payments and is permitted to continue operating while cutting costs – which may ultimately lead to fewer routes. 

If you have a ticket and your flight is canceled, call Spirit to figure out a refund as soon as possible.

What is Chapter 11 bankruptcy?

The term bankruptcy tends to indicate that a business is closed. But this isn't the board game Monopoly – declaring bankruptcy of this kind does not end a business. According to uscourts.gov, businesses will keep their assets when filing for Chapter 11. 

Instead, declaring bankruptcy shields the business from debt, while allowing the organization to restructure the debt and work out plans to climb out. This is why, according to Lending Tree, Chapter 11 is often called reorganization bankruptcy – it gives the business a chance to restructure.

Chapter 11 bankruptcy does not define what happens to debts. Filing for Chapter 11 helps businesses keep their assets and address debt problems. It also can help prevent the sale or liquidation of the company. 

During Chapter 11 proceedings, the business, now termed as the 'debtor in possession,' typically keeps control of its assets and continues to operate under the supervision of the court.