Spirit Airlines Considers Bankruptcy Amid Mounting Debt Crisis

US low-cost carrier Spirit Airlines has entered discussions with bondholders regarding a potential Chapter 11 bankruptcy filing as it battles financial woes. The airline, based in Florida, has been forced to restructure its operations, fleet, and network amid ongoing monetary challenges, further strained by the US Department of Transportation’s rejection of its proposed merger with JetBlue earlier in 2024.

Spirit is exploring bankruptcy protection to secure more time and shield itself from creditors while implementing cost-cutting measures. However, any such filing would depend on gaining the necessary support from bondholders and reaching formal agreements with creditors.

Alongside bankruptcy talks, Spirit is reportedly considering an out-of-court restructuring of its balance sheet, according to a report by the Wall Street Journal. The airline is grappling with approximately $3.3 billion in debt, including $1.1 billion in secured bonds maturing in the next year. By October 21, 2024, Spirit must refinance or extend these bonds, increasing pressure on the company to find solutions.

CEO Ted Christie confirmed in August 2024 that discussions with bondholders’ advisers had begun to address the bond maturities. Despite implementing cost-saving measures, Spirit continues to face profitability issues, worsened by the ongoing maintenance problems with its Airbus A320neo fleet’s Pratt & Whitney engines. This led to a 20% reduction in flights for the last quarter of 2024 and furloughs for many pilots.

Spirit had hoped its merger with JetBlue would create a stronger competitor against US legacy carriers like Delta, United, and American Airlines. However, the deal was called off in March 2024 after the Department of Transportation ruled that certain conditions were unmet.

On October 4, 2024, Spirit Airlines’ stock plunged by 40% following news of the bankruptcy discussions. The company’s stock value has fallen by more than 85% this year, with the airline also warning of a greater-than-expected third-quarter loss due to stiff competition and an oversupply of seats in the domestic market.

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