(Bloomberg) — On its first day in bankruptcy court last November, Spirit Airlines had a simple message for its employees, customers and creditors: Nothing would change for “99.9%” of them, as company lawyer Marshall Huebner put it. 

The no-frills, discount carrier only filed its Chapter 11 so it could implement a deal with a small number of bondholders who had agreed to swap their debt for stock. That would slash Spirit’s interest bills without the long, expensive court fights — with unions, plane-lease companies, and others — seen when rival airlines went broke.

“And so I do want to stress at the very outset the extraordinarily surgical nature of what we intend to do here,” Huebner told US Bankruptcy Judge Sean Lane during a hearing in New York.

The surgery hasn’t been a success. Spirit warned investors late Monday that it may not survive after revenue dropped, losses kept piling up and it continued to burn through cash just five months after emerging from bankruptcy. The announcement rattled investors, who drove Spirit’s stock price down 49% over the past four days, capping an 80% slide since late April.

During its five-month stint under court supervision the company avoided the kind of hard decisions seen in other airline bankruptcies. American Airlines Group Inc. spent nearly two years in bankruptcy, slashing labor costs, freezing its pension plans and renegotiating financing terms on more than 400 aircraft. Delta Air Lines Inc. and Northwest Airlines Corp. also used their time in court to make similar cuts.

“Spirit didn’t use all the tools available under Chapter 11 to fix the business,” said bankruptcy attorney Brett Miller, who represented the official committee of unsecured creditors, during the restructuring case. “There were no negotiations with vendors, labor or aircraft lessors, which typically occur as part of the go forward business-plan process.”

Spirit instead hinged its hopes on a deal with Citadel Advisors, Pacific Investment Management Co., Western Asset Management Co. and other big bondholders, which received equity in exchange for eliminating about $795 million of long-term debt. The company’s business plan predicted it could generate a net profit of $252 million in 2025, court documents show.

In a filing with the US Securities and Exchange Commission on Monday, Spirit Aviation Holdings Inc., the carrier’s parent, said if it can’t keep enough cash in the bank, creditors could jeopardize the company’s survival by demanding accelerated debt repayments. Its credit-card processor has also said that if Spirit doesn’t set aside more collateral it won’t renew its contract when it expires this year, imperiling the ability to accept customer payments.

Spirit declined to comment.

Chief Executive Officer Dave Davis tried to reassure employees in a memo Tuesday by downplaying the warning in its securities filing about the doubt about its ability to “continue as a going concern.”

“This is a phrase required by our outside auditors to convey that there is risk if we do not make changes,” according to the memo seen by Bloomberg News. “But, we are.”

The airline is growing in stronger markets with more opportunities, he said, while re-evaluating unprofitable routes and improving revenue-management and sales practices. That has included abandoning the original business model of charging just for a seat and adding fees for anything else, joining other carriers that have gone back to offering traditional amenities.

But Spirit is still contending with considerable fixed costs. Most employees are covered by union contracts, including pilots who approved a two-year labor agreement in 2023 that boosted captain’s pay 25% and 43% for first officers. The contract was valued at $463 million, up 27% from the previous agreement.

And, like other airlines, Spirit this year has contended with a dropoff in demand as President Donald Trump’s trade war undermined consumer confidence. While travel snapped back near the end of June, several carriers are forecasting profit this quarter will be flat or below 2024’s levels.

Spirit reported a $256.8 million loss in the second quarter as revenue fell 20% from a year earlier. Flying capacity tumbled 24% while miles flown by paying passengers dropped 27%. Non-fuel costs for each seat flown a mile, a measure of efficiency, rose 19%.

This week’s warnings likely won’t help it win back customers. Savanthi Syth, a Ramond James analyst, said in a report that there “is more to go in terms of how the next few months unfold” but noted “there is the risk of added pressure if headlines spook passenger demand.”

–With assistance from Stefani Reynolds.

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