Shares of Spirit Airlines dropped nearly 30% in early trading on Friday after a report from The Wall Street Journal revealed that the ultra-low-cost carrier is in discussions with bondholders regarding a possible bankruptcy filing.
The company’s stock has already declined by more than 85% this year, largely due to the fallout from a failed $3.8 billion merger with JetBlue Airways.
As of December 31, Spirit Airlines carried long-term debt and finance leases totaling approximately $3.06 billion, excluding current maturities. While a bankruptcy filing is not expected to happen immediately, the company is reportedly exploring a potential Chapter 11 filing as it struggles to manage its debt and ongoing losses.
Spirit Airlines has been facing several financial challenges, including grounding multiple Airbus planes due to issues with Pratt & Whitney engines. Additionally, the company has been unable to post a profit in five of the last six quarters, and it has recently flagged a deeper loss for the third quarter, citing intense competition for budget-conscious travelers and an oversupply of airline seats in the US market.
The budget carrier is also considering restructuring its balance sheet through an out-of-court transaction, though discussions with bondholders have focused primarily on reaching an agreement to support a Chapter 11 bankruptcy filing. Spirit’s CEO, Ted Christie, had previously downplayed concerns over bankruptcy, expressing confidence in the company’s future following the failed JetBlue merger. However, Friday’s stock plunge marks Spirit’s largest percentage drop since January, with shares hitting a new all-time low of $1.59.
The airline’s operational and financial troubles are compounded by broader industry challenges. Spirit has furloughed hundreds of pilots, suspended recruitment, and reduced routes, as its fleet remains grounded due to engine recalls. Meanwhile, major airlines have intensified competition for bargain travelers, further eroding Spirit’s market share.
Spirit’s restructuring talks are being led by the law firm Davis Polk & Wardwell and investment bank Perella Weinberg, while bondholders are represented by Akin Gump Strauss Hauer & Feld.
With input from CNBC, Market Watch, and the Wall Street Journal.
