Spirit Airlines on Brink of Bankruptcy as Merger Talks Collapse
The ultra-low-cost carrier Spirit Airlines is teetering on the edge of bankruptcy, with shares plummeting 39% to $1.8 after hours on Tuesday. This drastic decline comes on the heels of failed merger talks with Frontier Airlines, as reported by the Wall Street Journal.
Merger Talks Fall Through
Just last month, Frontier Airlines was exploring a potential bid for Spirit, but ultimately decided not to pursue the deal. According to sources familiar with the matter, Spirit is now in advanced discussions with bondholders to craft a bankruptcy plan that would garner support from a majority of creditors.
Financial Woes Mount
Despite strong travel demand, Spirit has been hemorrhaging money, failing to report a profit in five out of the last six quarters. This raises serious concerns about the airline’s ability to manage its looming debt maturities. In an effort to cut costs and stabilize its finances, Spirit announced plans to furlough approximately 330 pilots on January 31.
Desperate Measures
In addition to the pilot furloughs, Spirit is also selling 23 older Airbus aircraft for $519 million. The sale proceeds are expected to provide a much-needed $225 million liquidity boost next year. However, these measures may not be enough to stave off bankruptcy, with Spirit preparing to file for protection within weeks.
Airlines Index Soars While Spirit Struggles
In stark contrast to Spirit’s woes, the S&P 500 passenger airlines index has surged 52% this year. This disparity highlights the significant challenges facing Spirit, which has seen its stock tumble nearly 80% in 2023.
Uncertain Future Ahead
As Spirit Airlines hurtles towards bankruptcy, the company’s future remains uncertain. With no immediate response to requests for comment, investors and customers alike are left wondering what’s next for the beleaguered airline. One thing is clear: Spirit’s financial struggles show no signs of abating, and a bankruptcy filing may be just around the corner.
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