Spirit Airlines mulls bankruptcy, sending its stock price into nosedive
Spirit Airlines is considering declaring bankruptcy after a proposed merger with Frontier Airlines fell apart.
The Miramar, Florida-based discount airline is expected to file for bankruptcy protection from its debts in as little as 10 days or within weeks, sources familiar with the matter confirmed to CBS News. The Wall Street Journal first reported the looming bankruptcy filing.
Spirit acknowledged in a regulatory filing late Tuesday that it is in "active and constructive discussions" with bondholders to restructure its obligations as its business woes continue. If the talks succeed, the airline expects operations to continue, and for employees and customers to be shielded from any impact.
Spirit declined to comment on the matter.
The company's stock price cratered after news surfaced of the potential bankruptcy filing, tumbling nearly 55% to $1.46 in morning trade.
In October, Spirit and Frontier revived merger talks after discussions in 2022 ended with JetBlue outbidding Frontier, according to the WSJ. A federal judge blocked the JetBlue merger in January over antitrust concerns.
Spirit, the largest budget airline in the U.S., has lost more than $2.5 billion since the beginning of 2020, driven by a lull in travel during the pandemic era. The airline faces looming debt payments totaling more than $1 billion over the next year, obligations that it's unlikely to be able to meet.
In the first six months of 2024, Spirit passengers flew 2% more than they did in the same period last year, but spent 10% less per mile. The airline's revenue per mile from fares was down nearly 20%, contributing to its losses.
At the same time, its labor costs have risen, and legacy carriers have poached some of Spirit's customers by offering their own versions of bare-bones tickets to budget-conscious fliers.
Spirit said in an October regulatory filing that it has identified about $80 million of cost-cutting measures set to begin early next year, according to CBS News Miami. Those cuts will be driven primarily by a "reduction in workforce," the Florida-based airline noted. The carrier also disclosed that it had agreed to sell 23 airplanes to GA Telesis, an aviation services company, for about $519 million.
