Ultra-low-cost carrier Spirit Airlines is reportedly close to filing for bankruptcy amid a cash crunch and mounting debt. The airline has struggled with multiple setbacks in recent times, including a failed merger attempt with JetBlue along with increased market competition, all of which have debilitated its financial position.
Spirit could file for bankruptcy
According to a report by The Wall Street Journal (WSJ), Spirit Airlines is close to filing for bankruptcy protection. There were reports a few weeks ago about
Frontier Airlines and Spirit entering talks about a possible merger
, but WSJ reports that those discussions have broken down, leaving the beleaguered carrier with no choice but to file for bankruptcy.
Spirit has amassed significant debt to keep operations afloat and is staring at debt maturities that are approaching fast. WSJ says that the airline is in advanced discussions with bondholders to formulate a bankruptcy plan that will also keep the creditors satisfied.
Those following the developments at Spirit Airlines
will not be too surprised by the news. WSJ previously reported that the airline is staring at a possible bankruptcy, although a timeframe was not discussed. This time around, the report suggests that it could be just weeks away.
Shares plunge
Not that Spirit’s shares were in the pink of health, but news of bankruptcy has pushed their value further down. According to Reuters, the carrier’s shares fell by almost 40% after trading began. In fact, its shares have seen a massive dip of 80% so far this year.
Photo: MKPhoto12 | Shutterstock
Spirit’s quarterly results also indicate its dwindling finances. The airline reported a net loss of around $158 million in the second quarter. Back then, the airline revealed plans to put hundreds of pilots on furlough to preserve cash.
Spirit has also trimmed its network significantly, as it struggles to make a profit on many routes and tries to focus on the ones that generate the most cash.
Tumultuous times
Unlike other US airlines, Spirit has not disclosed its Q3 financial results yet. The carrier said that it is currently engaged in a discussion with bondholders, which has caused a delay. Skift quotes the airline as saying,
“The negotiations, with a supermajority of the Noteholders, have remained productive, have advanced materially and are continuing in the near term, but have also diverted significant management time and internal resources from the Company’s processes for reviewing and completing its financial statements and related disclosures.”
Several factors over time have contributed to pushing Spirit to the brink of bankruptcy. The airline has admitted that it has struggled to maintain a healthy balance sheet with weak fares and non-ticket revenue that were “several dollars lower than anticipated” per passenger.
Photo: Robin Guess | Shutterstock
A crowded aviation market in the US certainly didn’t make life easier for the ultra-low-cost carrier. While the COVID-19 pandemic affected all airlines, Spirit seems to have been hit harder than others and seems to be struggling in a space saturated with players, including full-service legacy carriers, such as United, American, and Delta Air Lines, as well as popular low-cost players like Southwest.
Related
Spirit Airlines Will Furlough 330 More Pilots By January To Cut Costs
Spirit Airlines has already had several rounds of furloughs in 2024, cutting capacity, in part, due to issues with the PW1100G engine.
A failed merger attempt with JetBlue and aircraft groundings due to engine issues were also significant contributors to Spirit’s present financial state. It remains to be seen how things progress further.