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Spirit Airlines’ shares plunged more than 50% in early trading Wednesday, following a report that it is preparing to file bankruptcy and the company’s announcement that it won’t report quarterly financial results because it’s scrambling to reach a deal with creditors.
A Wall Street Journal report Tuesday evening said a bankruptcy filing is expected to happen within weeks, as talks with Frontier Airlines to possibly buy Spirit (SAVE) broke down recently. Neither Spirit nor Frontier would comment on the report.
Spirit did, however, say in a Securities and Exchange Commission filing Wednesday that it is in “productive” negotiations with its lenders to restructure its debt, which comes due in 2025 and 2026. Spirit also said any restructuring of its debt would not affect customers, employees or suppliers.
Because of those discussions, the company said, Spirit is unable able to complete its third-quarter financial report by the prescribed time. It did say that losses continued to increase in the quarter and revenue fell.
Customers may be nervous about booking on Spirit as the future of the company remains in question. In August, Spirit stopped charging passengers cancellations or change fees, saying it was part of an effort to improve customer experience.
The Spirit saga began in February 2022, when the airline announced it would be sold for $2.8 billion to Frontier a similarly ultra-low fare carrier that sells basic tickets for cheap and up-charges for any and all “extras” including carry-on baggage.
Then, in April 2022, JetBlue Airways offered $3.6 billion for Spirit. While Spirit management tried to move ahead with the Frontier deal, its shareholders rejected the offer and Spirit ultimately agreed to the JetBlue deal instead.
However, in May 2023, the Justice Department sued to block the JetBlue-Spirit deal on antitrust grounds. It argued such a combination would hurt airline passengers because it would reduce the number of inexpensive airline tickets putting upward pressure on airfares overall. In January 2024 a federal judge agreed with DOJ’s argument and blocked the JetBlue deal.
Spirit’s stock plunged after the January ruling, and analysts speculated that Spirit could be forced out of business. Spirit denied that speculation at that time. JetBlue initially moved to appeal the decision, but in March it pulled out of the deal.
Spirit has been struggling financially. With Wednesday’s drop the stock is down 89% year-to-date. The airline also reported operating losses of $360 million in the first six months of this year, nearly four times the losses reported in the first half of 2023.
Spirit has also taken several measures to raise cash and cut costs. It recently announced a sale of 23 of its Airbus jets and delayed future aircraft deliveries. The company also furloughed hundreds of its pilots, and it plans to cut additional staff in January.
