Spirit Airlines stock plunged on Friday as it entered talk for a potential bankruptcy filing. The company shares hit a record low, revealing some of the internal struggles being faced by the business at the moment. The airline is under a huge debt of more than $1 billion that needs to be renegotiated by October.
The company has been running at a loss since 2020. Before the pandemic, Spirit was punctual and profitable, efficiently serving budget-friendly travelers. In 2023, the airline had claimed that it was not planning to file for bankruptcy anytime soon. However, the times have changed and Spirit Airlines is engaging in talks for Chapter 11 bankruptcy protection.
Inside the Spirit Airlines Bankruptcy Rumors
As per the reports, Spirit Airlines is currently in talks with its shareholders and creditors to support the bankruptcy filing to get protection from the looming debt. The airline has $1.1 billion in debt due for next year, which needs to be refinanced by October 21.
Brandon Oglenski, Barclays Airlines analyst said the airline has reduced their capacity growth plans for November and December by 17%. Spirit Airlines is believed to have lost $193 million in its second quarter this year. Since 2020, the company has consistently witnessed a disappointing financial performance.
On Friday, the company’s stock price hit a record low of $1.69. Last week, shares dropped by over 24%. The stock has seen a staggering decline of 90% this year. The situation highlights ongoing challenges in the market.
JetBlue Merger Rejected: Spirit Airlines Enters Bankruptcy Talks
Spirit was a budget-friendly airline that rose as a cheaper alternative compared to other airlines. Soon, large airlines also copied the business model and provided affordable alternatives for budget-conscious travelers. To compete with its larger rivals, Spirit Airlines planned a merger with JetBlue, intending to create a low-fare contender.
The merger valued at $3.8 billion was expected to create a cost-efficient airline in the market. However, a federal judge blocked the merger in March 2024 on antitrust grounds. Additionally, Spirit Airlines encountered challenges with the expensive engines supplied by Pratt & Whitney. These high costs have contributed to the airline’s financial difficulties.
The company is considering filing for bankruptcy due to its significant debt and ongoing financial struggles.
