Spirit Airlines Prepares Chapter 11 Amid Financial Struggles and Failed Merger

Florida-based Spirit Airlines is reportedly preparing for a Chapter 11 bankruptcy filing after unsuccessful merger talks with Frontier Group Holdings, according to The Wall Street Journal. The failed merger discussions, compounded by worsening finances and expiring bonds, led to a sharp 47% drop in Spirit’s share price on November 11, 2024. Spirit had re-engaged with Frontier earlier in 2024 after an initial merger attempt in 2022, but negotiations have ended without agreement, leaving Spirit in a precarious financial position.

The airline faces significant pressure to address $1.1 billion in expiring bonds over the next 12 months, as well as an overall debt burden estimated at $3.3 billion. To navigate this financial crisis, Spirit is in advanced negotiations with bondholders, hoping to secure creditor approval for a streamlined Chapter 11 process that would allow continued operations while raising cash.

On November 12, 2024, Spirit disclosed in a filing to the US Securities and Exchange Commission that it was unable to release its third-quarter 2024 financial results on time due to ongoing restructuring discussions with bondholders. Spirit’s projected Q3 2024 results show a 12% drop in operating margin year-over-year, attributed to decreased revenues and higher operating costs. Revenues are estimated to be down by $61 million compared to Q3 2023, with operating expenses rising by approximately $46 million.

Amid mounting losses, Spirit has scaled back its operations, reducing flights by 20% in Q4 2024 due to engine maintenance issues and furloughing hundreds of pilots. The airline’s future hinges on finding new liquidity sources and restructuring its debts, with analysts deeming bankruptcy a likely outcome if these efforts fall short.

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