FLORIDA- Spirit Airlines (NK) is on the brink of filing for bankruptcy protection following the collapse of merger talks with Frontier Airlines (F9), igniting concerns among passengers about possible mass cancellations.
News of the failed merger led to an immediate 45 percent drop in Spirit’s share price, wiping out hundreds of millions in market value from the discount airline in a matter of seconds.
Spirit Airlines Bankruptcy Odds
The Florida-based airline is now in critical talks with bondholders, aiming to solidify a restructuring plan that secures the backing of key creditors. According to a report from the Wall Street Journal this evening, Spirit’s total debt stands at over $3 billion.
The airline has already scaled back growth plans, furloughed employees, and arranged to sell 23 planes this year. Spirit is expected to pursue Chapter 11, which allows it to continue operations while restructuring its debt.
This filing may lead to route and staffing cuts, and, if cost reductions fail, a full shutdown remains possible.
Despite high travel demand, Spirit has struggled financially. Its $3.3 billion debt includes over $1.1 billion in secured bonds due within the year. Spirit faced an October 21 deadline from its credit card processor to refinance or extend these notes.
Last month, Spirit announced it would furlough about 330 pilots on January 31 as part of its cost-cutting measures.
Also Read Which Carriers can Benefit from Spirit Airlines Bankruptcy?
Financial Issues
Spirit Airlines has reported losses in five of the last six quarters, raising questions about its ability to handle upcoming debt obligations.
The airline has faced mounting losses and declining revenue since the pandemic, failing to turn an annual profit even before COVID-19 disrupted air travel. As travel rebounded, many customers chose larger carriers, leaving Spirit and other budget airlines struggling for market share.
In 2022, Frontier Airlines and Spirit initially aimed to merge. However, JetBlue Airways (B6) offered a higher bid, gaining favor with Spirit shareholders. Spirit’s leadership viewed a merger with JetBlue as a potential boost, but the Department of Justice blocked the deal, citing anti-competitive concerns.
A judge later upheld this view in January, stating that a merger would harm travelers who depend on Spirit’s low fares by reducing competition.
Following the ruling, JetBlue withdrew from the merger. Spirit resumed talks with Frontier in October, hoping to revive the merger, but Frontier ended negotiations. Spirit’s shares have since fallen more than 86 percent this year.
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