(WJET/WFXP) — Spirit Airlines is reportedly in advanced talks over a possible bankruptcy filing following a failed merger and continued financial struggles, The Wall Street Journal reported Tuesday evening.
Spirit had been exploring a merger with Frontier Airlines, another low-cost airline, in hopes of restructuring its debt and other liabilities without a bankruptcy filing. In March, JetBlue and Spirit Airlines ended their proposed $3.8 billion merger after a court ruling blocked the deal.
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JetBlue said both companies felt they were unlikely to meet the required closing conditions before the July 24 deadline and mutually agreed that terminating the deal was the best decision for both.
Now, Spirit may be preparing to file for Chapter 11 bankruptcy protections to facilitate the restructuring of the company and its debts. The filing could come within the next few weeks.
Previously, Spirit had received an extension granting the company nearly two additional months, until December, to refinance its over $1 billion in secured bonds owed to its credit card processor. This is just part of the $3.3 billion debt the company carries.
To cut costs, Spirit has begun cutting jobs and selling off some jets worth millions of dollars. These measures are expected to save the company around $80 million and are set to begin next year.
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The airline also disclosed that it’s agreed to sell 23 airplanes to GA Telesis, an aviation services company, for about $519 million. The Airbus A320ceo and A321ceo models, which were manufactured between 2014 and 2019, are expected to be delivered through February.
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After the news of the potential bankruptcy reached traders, Spirit Airlines shares plummeted by over 60%. So far this year, the stock is down by 80% over the last year.
The past few years have been far from smooth sailing for Spirit. The airline failed to return to profitability when the COVID-19 pandemic eased and travel rebounded — largely due to rising operational costs and increased competition. Rival carriers have snagged some of Spirit’s budget-conscious customers by offering their own versions of low-cost, no-frills tickets.
The Associated Press contributed to this report.
