Low-Cost Airline Files for Bankruptcy Again
The well-known budget airline, famous for its affordable flights and bright yellow planes, has announced its second bankruptcy filing in less than a year. Despite recently exiting a Chapter 11 reorganization, the airline has found itself back in financial hot water.
The company reassures its customers that, during this financial restructuring, business will carry on as usual. This means passengers will still be able to book flights and use their tickets, credits, and loyalty points. The airline also confirmed that its employees and contractors would continue to receive their paychecks.
Past Attempts to Stabilize Finances
The previous bankruptcy filing had a primary goal of reducing the airline's debt and boosting capital. However, following their exit from that process, it quickly became apparent that more work was needed, and additional resources were required to secure the airline's future.
Earlier in the month, the parent company of the airline publicly expressed their concern in a quarterly report. They admitted to having considerable doubt about their ability to survive financially over the next year due to adverse market conditions and a lack of demand for domestic travel.
The airline had previously made attempts to revive its business, but these efforts were unsuccessful in light of the ongoing pandemic.
Financial Struggle Continues Despite Efforts
The budget airline, recognized for its low-cost, no-frills flights, has had a hard time bouncing back in the wake of the COVID-19 pandemic. The increasing operational costs and accumulating debt forced the airline to seek bankruptcy protection previously, at which point the airline had already lost over $2.5 billion.
Upon emerging from bankruptcy protection, the airline managed to restructure some of its debt and secure financing for future operations. They also introduced several cost-saving measures, including plans to furlough approximately 270 pilots and demote around 140 captains to first officers.
The announced furloughs and demotion, set to take effect later in the year, align with the company's anticipated flight volume. However, despite these cost-saving measures, the company admits that it requires more funds. As a result, they may consider selling certain aircraft and real estate.
Attempts to Compete in a Tough Market
Discount airlines like this one face a challenging time competing against larger airlines, which have been successful in attracting budget-conscious customers with their own tiered offerings. In an attempt to break into the more upscale travel market, this airline is now offering flight options with tiered prices, with higher-priced tickets coming with more amenities.
Despite its financial troubles, the airline's relatively young fleet has made it an attractive target for takeover. However, previous attempts by other budget airlines to acquire the company have been unsuccessful.