Low-cost carrier Spirit Airlines recently filed for bankruptcy, and this development might actually end up benefiting investors in the airline sector. A media report stated that Bank of America lifted its outlook on the airline sector because of what it sees as a more constructive backdrop due to Spirit’s reduction in capacity and improving trends in the demand picture over the last several months.
“We believe that a reduction in Spirit’s capacity could shift market share to other players and benefit certain carriers whose routes are most exposed to FLYY,” said analyst Andrew Didora, while noting that in terms of market share on FLYY’s routes, the network carriers overwhelm FLYY’s capacity.
READ: Spirit Airlines files for bankruptcy, says it plans to continue flying (
“In 2025, American Airlines Group and Delta Airline hold 23% and 20% market share, respectively, while United Airlines has 16% and Southwest Airlines 14%. However, when looking at route overlap, low-cost carriers also benefit,” he said. According to MarketPulse, Frontier Airlines is the most compelling player in the post-Spirit landscape because of its disciplined debt management, fleet modernization, and strategic route expansion. However, risks remain, including potential regulatory scrutiny over reduced competition and the possibility of a broader economic downturn. Spirit, on the other hand, would be a riskier bet for investors.
While its restructuring could yield a leaner, more efficient airline, the likelihood of liquidation or further consolidation is significant. Allegiant Airlines offers a more defensive play with its focus on underserved markets and high-density operations. However, it has the limitations that come from its smaller scale and lesser exposure to Spirit’s key routes.
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Spirit Airlines filed for a new Chapter 11 bankruptcy protection on Friday, shortly after emerging from a previous Chapter 11 reorganization in March. The carrier has been struggling with its operations ever since it emerged out of its first bankruptcy.
The company has been attempting to rebrand as a higher cost airline to keep pace with trends that challenged the feasibility of its low-cost model. However, the airline’s recovery has been affected by uncertainty from President Donald Trump’s tariffs and budget cuts. The airline now carries $2.4 billion in long-term debt, most due in 2030, and reported a negative free cash flow of $1 billion at the end of the second quarter.
The airline says it plans to keep on flying. CEO Dave Davis said that it has become clear that there’s “much more work to be done, and many more tools are available to best position Spirit for the future,” and that “virtually every major U.S. airline has used these tools to improve their businesses and position them for long-term success.”