Ultra-low-cost carrier Spirit Airlines filed for protection under Chapter 11 of the US Bankruptcy Code today in the Southern District of New York. The news didn't surprise too many professionals who follow the company, which had been unprofitable for years following the COVID-19 pandemic.

The filing indicates a supermajority of Spirit's convertible bondholders is sponsoring the plan by making a commitment for $350 million in equity, $300 million in a loan, and swapping an estimated $800 million of bonds for equity in the reorganized company. The documents filed with the court contemplate an exit from bankruptcy protection in March 2025.

The problem is that the plan filed appears to ignore the fundamental issue with Spirit: it's not low-cost, only low-priced, which is why the company has proven unable to produce free cash flow. This fundamental disconnect with reality calls the plan's feasibility into question, along with the motivations of the plan sponsors. The plan raises questions such as:

• What will stop the new equity holders from turning around and selling the company to JetBlue or another viable suitor (assuming the incoming administration will be more likely to support consolidation than the outgoing administration) and potentially score a windfall? 
• Will the court approve the plan if future viability is in question? 
• How big of a fight will the existing shareholders put up? 

This unfolding of events in the airline industry should make for an interesting process.