• Spirit Airlines filed for Chapter 11 bankruptcy protection.
• The budget-travel icon said it will continue to fly.
• Spirit Airlines will have time and protection to restructure so it can continue flying and bringing in needed cash.

Spirit Airlines has filed for Chapter 11 bankruptcy protection, becoming the first major U.S. passenger carrier to do so since American Airlines 13 years ago.

The budget travel icon is not shutting down, however. The filing will buy Spirit time and protection to restructure so the carrier can continue flying and bringing in sorely needed cash.

CEO Ted Christie wrote to customers on Monday to reassure them that they can continue to book flights and use loyalty points or credits normally.

Here's what travelers need to know:

Why did Spirit file for bankruptcy?

Spirit Airlines has been losing money since 2019, but its financial woes worsened after the pandemic, when industry costs climbed, dozens of its Airbus jets were grounded because of an engine recall and a federal judge blocked Spirit's planned acquisition by JetBlue Airways.

The airline had struggled to renegotiate its $1.1 billion in debt payments due next year. A deadline at the end of the year tied to its credit card processing agreement was fast approaching.

Spirit said Monday that it has reached a prearranged deal with the majority of its bondholders for a "streamlined" Chapter 11 bankruptcy protection plan. It expects to exit that process in the first quarter of 2025.

Is my flight still happening?

Filing for Chapter 11 bankruptcy protection doesn't mean the airline will cease operations. Rather, it gives the airline protection to reorganize its business, which often means shedding assets or parts of its operation.

"From a consumer standpoint, you'll need to pay attention if Spirit makes any schedule changes or if they're going to get rid of any aircraft, lay off any pilots and flight attendants — that will affect the traveling public," said Henry Harteveldt, founder of travel consulting firm Atmosphere Research Group.

The carrier is likely to keep as much of its schedule as possible in place for the holiday season, when airlines generate a lot of revenue during the popular travel period, but additional cuts are likely not far behind.

What am I entitled to if Spirit cancels my flight?

Under U.S. rules, airline customers are entitled to a cash refund if the airline cancels their flight and they're not rebooked. Spirit Airlines said Monday that it plans to continue flying and CEO Ted Christie tried to reassure customers, whose bookings will bring in needed cash during the peak holiday season.

However, the Department of Transportation warns that bankruptcy protection could make getting a refund harder.

"If the airline or ticket agent has filed for bankruptcy, the company may be temporarily prohibited from providing refunds and/or vouchers — for example, to conserve assets," according to its website.

The agency says that if an airline that has filed for bankruptcy protection refuses to refund you for a canceled or significantly changed flight, your credit card could provide one under the Fair Credit Billing Act.

Even if you get a refund, however, buying a ticket last minute to replace your original flight could be costly due to high demand and scarce seats. Harteveldt recommends always buying airline tickets with a credit card, which affords customers more cancellation protections than debit cards or cash. Travelers can also book a refundable ticket on another carrier if they are worried, though that can be very costly, too.

Travel insurance might also cover pre-paid expenses if bankruptcy alters airline flights.

What happens next?

This remains to be seen. Spirit expects to exit Chapter 11 bankruptcy protection in the first quarter of next year. Airlines can emerge from this process as smaller, more cost-efficient carriers. Other airlines, short on airplanes, could scoop up some of Spirit's assets.

Spirit had a deal to merge with fellow discounter Frontier before JetBlue swooped in with a rival bid. Frontier and Spirit could attempt a combination again, especially since some industry members think the incoming Trump administration will be relatively friendly toward deal-making.