Spirit Airlines is in advanced talks for a bankruptcy filing following the collapse of merger talks with Frontier Airlines.
According to The Wall Street Journal, the low-cost airline is in talks with bondholders to work out a bankruptcy plan that would have the backing of most creditors as it grapples with growing losses and impending debt maturities. The outlet cited people with knowledge of the situation.
The outlet further stated that a bankruptcy filing might occur in a matter of weeks. To expedite the process and enable Spirit to exit without halting operations or depleting its remaining funds, a Chapter 11 sale would probably require the advanced consent of the airline’s creditors.
After The Wall Street Journal first shared the news, Spirit Airlines’ shares dropped around 47% in extended trading on Tuesday, as reported by Bloomberg. The airline also confirmed that it would be “unable to file its Quarterly Report on Form 10-Q for the quarter ended September 30, 2024 (the “Q3 2024 Form 10-Q”) by the prescribed due date without unreasonable effort or expense,” per an official announcement.
A spokesperson for the airline declined to comment on the Wall Street Journal report.
Spirit Airlines & Frontier Airlines Recently Revived Now-Collapsed Merger Talks
Just recently, Spirit Airlines reportedly began discussing the possibility of a merger with rival ultra-low-cost carrier Frontier Airlines again — talks that have now been dropped — just months after the Department of Justice formally blocked JetBlue’s nearly $4 billion acquisition of the discount airline in March, according to Simple Flying.
The two airlines have previously met to discuss the prospect of a merger: Spirit and Frontier originally discussed the possibility of an acquisition in February 2022, but JetBlue outperformed Frontier thanks to its far larger financial resources.
Spirit has over $3.1 billion in debt, including $1.1 billion in secured bonds that are due to mature in less than a year, according to Investor’s Business Daily. Additionally, the airline’s credit card processor requested that these bonds be refinanced or extended by the end of October.
Spirit is also struggling to make a profit on top of the debt. The company lost $193 million in the second quarter of 2024 in addition to the $143 million decline in the first quarter.
“Significant industry capacity increases together with ancillary pricing changes in the competitive environment have made it difficult to increase yields, resulting in disappointing revenue results for the second quarter of 2024,” said Spirit’s CEO Ted Christie in the company’s earnings release at the start of August.
