US ultra-low-cost carrier Spirit Airlines is now preparing to file for bankruptcy protection, according to a WSJ report. The airline is currently in final negotiations with its bondholders to finalize a bankruptcy plan.
It is now expected that the struggling airline will make bankruptcy filings within weeks. This development comes after the collapse of renewed merger talks with Frontier Airlines, the Wall Street Journal reports. The news sent Spirit Airlines stock plummeting by 45 percent in a matter of seconds.
Delay of Q3 2024 Filings
Spirit Airlines also announced on 12 November 2024 that it would submit a Form 12b-25 with the Securities and Exchange Commission (SEC), delaying its Q3 2024 disclosure.
A Form 12b-25 is a notification filed with the SEC by a public company when it anticipates missing the deadline for other key filings, such as quarterly financial results.
By filing Form 12b-25, Spirit is essentially requesting an extension for the filing deadline. Notably, the filing a Form 12b-25 is often seen as a further red flag by investors, as it may indicate underlying financial difficulties or operational issues within the company.
Although the airline has delayed the submission of its third quarter results, it prvided a broad outlook in a statement.
Spirit estimates its Q3 2024 operating margin will be approximately 12 percentage points lower than that reported for the third quarter 2023. This, it stated, was due to lower total operating revenues and higher total operating expenses.
Total operating revenues are estimated to have decreased approximately $61 million compared to the third quarter 2023.
Spirit Airlines Struggle to Date
Spirit Airlines has been struggling financially for some time. The airline has reported losses in five of the last six quarters, despite strong travel demand.
This is due in part to rising fuel costs and increased competition. Additionally, Spirit Airlines has a high debt load, which has made it difficult to invest in its fleet and operations.
The collapse of the merger talks with Frontier and then JetBlue further exacerbated Spirit’s financial problems. These deals were seen as a way for Spirit to consolidate its operations and reduce costs. Spirit Airlines opted to focus on a merger with JetBlue, which was ultimately rejected by regulators over competition concerns.
With Spirit Airlines now likely to file for bankruptcy, it represents a body blow to the airline industry. Spirit is a significant player in the ultra-low-cost carrier market, and its bankruptcy could lead to potentially higher fares for consumers.
Additionally, Spirit’s bankruptcy could have a ripple effect on other airlines, as it could lead to increased competition for pilots and other resources.
It is unclear what the future holds for Spirit Airlines. However, it is clear that the airline now faces a serious challenge. If Spirit is unable to restructure its debt and improve its financial performance, it may be forced to liquidate. This would be a major setback for the airline industry and for consumers.
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