Spirit Airlines on Brink of Bankruptcy as Merger Talks Fail and Stock Plummets

Spirit Airlines is on the verge of filing for bankruptcy protection after talks with Frontier Airlines about a potential merger broke down, according to a report by The Wall Street Journal on Tuesday. The ultra-low-cost carrier is currently in advanced discussions with bondholders to finalize a bankruptcy plan that would support the majority of its creditors. A bankruptcy filing could occur within weeks.

The airline has been struggling with significant losses and debt, making it the only U.S. carrier that has not reported its third-quarter earnings. Spirit’s financial woes have been exacerbated by its inability to shore up its balance sheet despite various efforts, including exploring an out-of-court transaction and restructuring its debt.

In recent months, Spirit has taken several measures to stay afloat, such as selling older Airbus aircraft to GA Telesis in a deal valued at $519 million, which would provide $225 million in liquidity through the end of 2025. Additionally, the company received an extension to refinance over $1.1 billion in debt related to its credit card transactions, with a new deadline set for December.

Separately, Spirit Airlines has faced additional challenges, including a recent incident where one of its flights was struck by gunfire while approaching Port-au-Prince, Haiti. This incident, along with similar incidents involving other airlines, has led to a temporary suspension of flights to and from Haiti due to security concerns. The Federal Aviation Administration has suspended all flights to Port-au-Prince for a week, and other airlines like JetBlue and American Airlines have also halted their operations to the region.

The safety incidents and the impending bankruptcy have contributed to significant volatility in Spirit Airlines’ stock. On November 12, 2024, the stock opened at $3.25 and traded as low as $3.07 and as high as $3.37, reflecting broader market volatility and company-specific challenges. Spirit Airlines’ stock has lost substantial value over the past year, with a 52-week range from $1.40 to $17.02, and analysts have set a target mean price of $2.21, indicating underperformance.