Spirit Airlines Stocks Plummet 60% Amid Bankruptcy Protection Filing Preparations
Spirit Airlines (NYSE:SAVE) shares plummeted over 60% on Wednesday following reports that the low-cost carrier is preparing to file for bankruptcy protection. According to sources familiar with the matter, the Florida-based budget airline is in advanced discussions with bondholders regarding a restructuring plan that could garner support from major creditors as it battles rising losses and significant debt obligations. The bankruptcy filing could occur within the next few weeks.
Recently, Spirit had restarted merger talks with Frontier Airlines, but ultimately, Frontier decided not to move forward with the deal. This agreement would have allowed the two low-cost carriers to merge and restructure under bankruptcy protection. Frontier declined to comment on this decision.
On Tuesday, Spirit confirmed that it has been having constructive discussions with bondholders to restructure its 2025 and 2026 debt. The company stated that any resulting "legal restructuring" would likely eliminate the existing shareholders' equity. However, it added that general creditors, employees, and suppliers would likely not be adversely affected.
In addition to its financial troubles, Spirit announced that it would delay its third-quarter Securities and Exchange Commission reporting, citing a significant decline in operating profit margins. The airline reported that its operating margin is 12 percentage points lower compared to the same period last year, attributed in part to increased expenses and revenue loss due to the elimination of change and cancellation fees.
Recognized for its low-cost business model that charges separate fees for additional services, the airline has recently faced significant impacts from increasing competition and high operational costs. To combat financial pressure, Spirit has already taken various measures, including selling 23 aircraft to GA Telesis for $519 million. However, reports indicate that these efforts may fall short of meeting a critical refinancing deadline with a credit card processor in December, alongside an upcoming $1.1 billion bond maturity.