Spirit Airlines cancels Airbus order in settlement with AerCap

AerCap to inject $150 million into Spirit, accept $572 million unsecured claim

Spirit Airlines loses $9.7 million to AerCap in bankruptcy settlement

Spirit to sign new lease agreement with AerCap for 30 Airbus aircraft

By Rajesh Kumar Singh and Doyinsola Oladipo

NEW YORK, Oct 10 (Reuters) – In a move to optimize its fleet, Spirit Airlines will decline its commitment to buy 52 Airbus planes as well as its option on 10 others. Aircraft orders will be taken over by AerCap, which leases the aircraft.

This three-way agreement is part of a dispute settlement between Spirit and AerCap that was approved Friday by the U.S. Bankruptcy Court for the Southern District of New York.

The dispute with the world’s largest aircraft leasing company was the trigger that pushed Spirit into its second bankruptcy.

In late August, AerCap unexpectedly terminated leases for 36 new Airbus A320neo family jets scheduled for delivery to Spirit between 2027 and 2028. It also claimed that there was a default on the leases of 37 aircraft currently in the carrier’s operational fleet.

Spirit disputed the validity of AerCap’s claims. However, with access to much of its current and future fleet compromised, the company was forced to file for bankruptcy protection.

As part of the agreement between the two companies, Spirit will reject 27 of its 37 leases. Meanwhile, AerCap was allowed to keep and use $9.7 million in cash deposits provided by Spirit for canceled aircraft leases.

The Irish rental giant was also granted permission to make unsecured claims against Spirit totaling up to $572 million. It is not yet clear how much he can collect on this claim.

Spirit will give up all rights to the 36 jets that are not delivered. Additionally, new lease agreements will be signed with AerCap for 30 new Airbus A320 or A321 aircraft for deliveries to be distributed evenly over 2027, 2028 and 2029.

As part of the deal, AerCap will inject $150 million in cash into the bankrupt airline.

Separately, Spirit said the court also approved a debtor-in-possession (DIP) financing facility from existing bondholders for up to $475 million. $200 million of the total funding will be immediately available to the carrier.

Spirit said in a statement that the deal allowed it to reduce operating costs by hundreds of millions of dollars.

Spirit plans to downsize its operations to reduce costs. It decided to put approximately 1,800 flight attendants, about a third of the cabin crew, on unpaid leave starting December 1.

The airline, which currently operates 214 aircraft, also plans to reduce its fleet by approximately 100 aircraft (almost half of its fleet).

(Reporting by Doyinsola Oladipo in New York and Rajesh Kumar Singh in Chicago; Editing by Diane Craft)