By Rajesh Kumar Singh and Doyinsola Oladipo
NEW YORK (Reuters) -In a fleet optimization move, Spirit Airlines will reject its commitment to buy 52 Airbus planes along with its options for 10 others. The aircraft orders will be taken over by aircraft lessor AerCap.
This three-way agreement is part of a dispute settlement between Spirit and AerCap, which was approved on Friday by U.S. Bankruptcy Court for the Southern District of New York.
The conflict with the world's largest aircraft leasing company
was the trigger for pushing Spirit into its second bankruptcy.
In late August, AerCap unexpectedly terminated the lease agreements for 36 new Airbus A320neo family jets that were scheduled for delivery to Spirit between 2027 and 2028. It also claimed default on the leases for 37 aircraft already in the carrier's operational fleet.
Spirit disputed the validity of AerCap's claims. But with access to a large portion of its current and future fleet jeopardized, the company was forced to seek bankruptcy protection.
As part of the settlement between the two companies, Spirit will reject 27 out of the 37 leases it holds. AerCap, meanwhile, was granted permission to keep and use $9.7 million in cash security deposits that Spirit provided for the canceled aircraft leases.
The Irish leasing giant also has been granted permission to file a total unsecured claim of up to $572 million against Spirit. It is not clear yet how much it will be able to collect on that claim.
Spirit will give up all its rights to the 36 undelivered jets. Additionally, it will sign new lease agreements with AerCap for 30 new Airbus A320 or A321 airplanes for deliveries spread equally across 2027, 2028 and 2029.
As part of the deal, AerCap will make a cash injection of $150 million into the bankrupt airline.
Separately, Spirit said the court has also approved a debtor-in-possession ("DIP") financing facility of up to $475 million from its existing bondholders. Of the total financing, $200 million is immediately available to the carrier.
In a statement, Spirit said the agreement allows it to reduce operating costs by hundreds of millions of dollars.
Spirit plans to shrink its operations to reduce its costs. It has decided to furlough approximately 1,800 flight attendants, about one-third of its cabin crew, effective December 1.
The carrier, which currently operates 214 aircraft, also plans to shrink its fleet by nearly 100 aircraft, nearly half of its fleet.
(Reporting by Doyinsola Oladipo in New York and Rajesh Kumar Singh in Chicago; Editing by Diane Craft)
