Spirit Airlines has announced it will lay off about 200 employees as part of a cost-cutting effort to emerge from bankruptcy.
The company's CEO, CEO Ted Christie, notified employees of the job cuts Wednesday night.
Mr. Christie came under fire from Spirit shareholders late last year after it was revealed that he had received a multimillion-dollar retention bonus just a week before the company filed for Chapter 11 protection.
The job cuts are part of Spirit's strategy to reduce annual expenses by $80 million. The company had about 13,000 employees at the end of last year, including about 2,000 non-union employees, according to court filings related to the bankruptcy case.
Christie told employees that layoffs are necessary to adapt to current economic realities.
“As you all know, we are facing significant challenges to our business,” he wrote in a memo to employees. The Wall Street Journal reported.
“The bottom line is we need to run a smaller airline and get back on better financial footing.”
Spirit Airlines filed for bankruptcy last year, citing high debt burdens and increased competition in the low-cost travel sector.
The airline, once a pioneer in the ultra-low-cost model, suffered a major setback when a federal judge blocked its planned merger with JetBlue.
Despite these hurdles, Christie expressed confidence that Spirit's bankruptcy process is progressing smoothly and that he expects the company to emerge from Chapter 11 later this quarter.
The bankruptcy marked a dramatic shift for Spirit, which had been restructuring air travel by offering low fares and a la carte pricing for services such as water, reserved seats and printed boarding passes.
This strategy has fostered rapid growth and established Spirit as a leader in the low-cost airline industry.
But the coronavirus pandemic and ensuing market challenges have drained significant cash, with Spirit reporting more than $2.2 billion in losses since 2020, the largest amount accumulated since adopting an ultra-low-cost strategy in 2006. Almost all of the profits made have disappeared.
The layoffs affect employees across multiple divisions and follow previous measures such as furloughing pilots and voluntary furlough extensions for flight attendants.
Spirit became the largest U.S. airline to file for Chapter 11 in more than a decade.
The airline's struggles highlight the instability of the airline industry, particularly low-cost carriers that rely on high passenger numbers and low profits.
Just one week before filing, Christie received a $3.8 million retention bonus
The bonus was approved by Spirit's board of directors on Nov. 12 and is conditional on Christie remaining with the company for an additional year.
If you leave your job before this period, your bonus must be repaid within 10 days.
A spokesperson for the airline said: “By retaining our core management team, we have experienced decision-makers to navigate our complex financial situation and make informed strategic decisions about the future. I can do it,” he told the Post.
“The board felt it was necessary to maintain stability in the leadership team, which is critical to supporting the entire organization.”
