Investing.com -- Spirit Airlines has entered Chapter 11 bankruptcy for the second time in less than two years, renewing concerns about the outlook for the U.S. airline industry.
The filing, announced Friday after the close of trading, offered no details on debtor-in-possession financing or a restructuring plan.
Spirit has already cut deep. The carrier reduced capacity 24.5% year over year in the second quarter, is scheduled to shrink 26.5% in the third quarter, and will scale back another 12.8% in the fourth.
Its share of domestic capacity now stands at 4%, down from 5.3% in 2023. In its statement, the airline said it will "focus its flying on key markets to provide more destinations, frequencies and enhanced connectivity in its focus cities," highlighting Fort Lauderdale, Orlando and Detroit while retreating elsewhere.
The market reaction to Spirit's previous bankruptcy in November 2024 was mixed. Airline stocks fell sharply on the day of that filing, with Frontier down 18% and JetBlue down 9.5%.
Over the following three months, Alaska, Frontier and Sun Country outperformed, while JetBlue and Southwest lagged.
Analysts caution against assuming the same outcome this time. Consensus 2025 earnings estimates have fallen across the sector, with United and Delta down 15% and 22% respectively. By contrast, Frontier and JetBlue saw declines of more than 200%.
Exposure to Spirit varies widely. Frontier faces the heaviest overlap, with 40% of its seats competing directly. JetBlue is exposed on 12% of its system; Sun Country 9%; Southwest 7%. United, American and Allegiant show 4% to 5% overlap; Alaska 2%; while Hawaiian has none.
At the market level, Spirit's pullback is most visible in its key airports. At Fort Lauderdale, it holds 26% share, trailed by JetBlue at 21% and Delta at 12%.
In Orlando, Southwest leads with 19%, while Delta, JetBlue and Frontier cluster near 9%. Spirit has lost ground in Las Vegas, where its 9% share trails Southwest at 31%.
Detroit remains dominated by Delta at 71%, though Spirit has grown capacity there 19% this year. In Los Angeles, where United and Delta each hold 13%, Spirit has shrunk to just 2%.
Industry trends set the backdrop. Domestic capacity turned negative year over year in August; fares improved; and jet fuel prices moderated.
Wolfe Research analysts wrote that "the bull-case on airlines seems to be building with Spirit's bankruptcy," while adding that the carrier represents only 4% of industry capacity, meaning the filing "isn't necessarily a cure-all for the industry".
Performance remains weak in 2025. The Wolfe Airline Index is down 14% year to date, underperforming the S&P 500, which is up 10%.
The Domestic Airline Index has fallen 19%, while the Legacy Airline Index is down 4%. Since 2019, market share has shifted only modestly.
Delta stands at 19.6%, United at 18.3% and American at 20.5%. Southwest holds 17.9%, while smaller carriers remain in single digits. Spirit itself is down to 4%.
History offers one final reference point. Both Frontier and Sun Country shrank sharply after filing Chapter 11 in prior years but returned to growth about two years later.
Spirit, which already cut 20% to 30% of capacity through 2025, is scheduled to shrink another 13% in the fourth quarter. Its future, and the industry's response, remain tied to how that restructuring unfolds.