2025 Aviation Bankruptcy Update
In keeping with the past five years, 2025 has continued to be an active time for airline restructurings and liquidations. The two largest U.S. aviation Chapter 11 proceedings that commenced during 2024, Spirit Airlines and GOL, both concluded during the first half of 2025 by successfully confirming a Chapter 11 plan of reorganization. While GOL has thrived since exiting Chapter 11, Spirit Airlines filed a second Chapter 11 case (commonly referred to as a "Chapter 22") only a few months later. Regional airline Silver Airways LLC and its affiliate, Seaborne Airlines, commenced proceedings under Chapter 11 but saw those cases converted to liquidations under Chapter 7 only a few months later when they were unable to effectuate going concern transactions or obtain sufficient financing to support their operations in bankruptcy. Brazilian airline Azul began 2025 by closing the latest of its out-of-court restructurings. However, by the end of May, only a few short weeks later, it filed proceedings under Chapter 11, as its out-of-court restructuring transactions proved insufficient to resolve its ongoing liquidity, operational and capital structure woes.
GOL's journey through Chapter 11 took a traditional path, pursuing a comprehensive restructuring of its outstanding operational and financial indebtedness. At the time when GOL filed for bankruptcy, it had not begun formal negotiations with all creditor constituencies regarding their treatment under a proposed Chapter 11 plan. As such, GOL spent 20 months in Chapter 11 securing new financing, negotiating with aircraft lessors, developing a fleet plan for bankruptcy emergence and reaching settlements with bondholders and other key creditor constituencies. Those negotiations culminated in a Chapter 11 plan that all impaired creditors (i.e., creditors that would not be paid in full) had a chance to review and vote upon. All creditor classes eventually voted to accept the GOL plan.
Spirit Airlines filed its initial Chapter 11 cases in late November 2024 and proceeded to speed through the plan confirmation process. Unlike GOL, Spirit chose to forgo any sort of operational restructuring in favor of a limited balance sheet reorganization effectuated by swapping a chunk of its existing senior secured bond debt for the equity of the reorganized company. Spirit obtained confirmation of a plan for its 2024 case in late February 2025 and emerged from bankruptcy in March 2025, 87 days after filing.
Spirit's quick trip through its first Chapter 11 case was possible because it had negotiated a comprehensive restructuring framework (including proposed plan treatment) with substantially all impacted noteholders before that case began. Under the Spirit plan, debts other than those of the impacted noteholders (including aircraft lease debts) were left "unimpaired" (meaning that such debts would continue to be fully repaid, notwithstanding the bankruptcy filing). Given that Spirit's proceeding only restructured its balance sheet, operational issues were not addressed. By summer 2025, it became clear that Spirit required more than just a balance sheet reset. In mid-August, Spirit announced a going concern warning in the quarterly report issued for its first-quarter post-bankruptcy and within two weeks had filed a second Chapter 11 case. Based on the statements made at Spirit's first-day hearings, it is clear that Spirit intends a comprehensive restructuring of its operations during its second trip through Chapter 11.
Silver Airways and Seaborne Airlines filed their Chapter 11 cases at the very end of 2024. For several months they sought financing and tried to sell their operations as a going concern. A lack of progress in obtaining financing or a viable buyer, as well as a lack of confidence in the debtors' management, led some of Silver/Seaborne aircraft lessors to take back their aircraft back at the end of the 60-day Section 1110 period, while the airline was still operating. The retrieval process was impeded by the airline' refusal to cooperate and required court intervention but ultimately was successful. Although the airlines did ultimately obtain debtor-in-possession (DIP) financing, it proved insufficient to support their operations, especially after the debtors' projected revenues were significantly impacted by a maintenance issue that caused operations to shut down over the 2025 Memorial Day weekend. Silver's assets ultimately were sold, but the airline ceased operations before closing, leaving behind millions of dollars in unpaid administrative expenses and employee wages. A Chapter 11 trustee was appointed to oversee the sale of Seaborne, after which the cases were both converted to Chapter 7 liquidation proceedings.
Like many other airlines that were shut down during the COVID-19 pandemic, Azul entered 2025 with significant financial debt and deferred lease obligations. During the years since the end of the pandemic, Azul had implemented a series of out-of-court restructurings of its debt in an attempt to forestall bankruptcy (even while many other Latin American airlines were restructuring in U.S. Chapter 11 proceedings). Beginning in the fourth quarter of 2024 and continuing through April 2025, Azul negotiated and closed the latest such transactions. Despite this, in May 2025, a few weeks after the last of these out-of-court transactions closed, Azul commenced its own Chapter 11 cases.
Like Spirit, Azul commenced its restructuring with prenegotiated restructuring support agreements entered into with certain of its senior secured lenders and certain other key constituencies and plans to exit Chapter 11 within a few months. Unlike Spirit, Azul is using Chapter 11 to effect operational and other changes, including rejecting and renegotiating aircraft equipment leases, implementing a new fleet plan and seeking to discharge its prepetition unsecured debt.
Conclusion
After such an active restructuring year, it's hard to speculate exactly what form (or forms) the next wave of airline restructurings will take in 2026. Successful consummation of the Azul proceedings according to its targeted timeline could mean that the next wave of restructurings will proceed according to shorter timetables (with more terms negotiated in advance of the formal court proceedings). However, Spirit's quick return to Chapter 11 may signal a pivot back toward longer, more "traditional" comprehensive restructurings, similar to GOL and past airline Chapter 11 cases. Either way, Holland & Knight looks forward to working with the lessor community to help write the 2026 chapter of airline restructuring history.