Spirit Airlines announced on November 14, 2023 that it is actively discussing with creditors and evaluating potential strategies to enhance liquidity. The airline is working closely with a supermajority of its noteholders, reporting that negotiations have progressed and will continue shortly. However, if an agreement cannot be reached, Spirit may face the cancellation of existing equity and will consider all available alternatives to address its financial challenges.
After recent talks with Frontier Airlines over a potential merger failed, reports surfaced that Spirit is preparing to file for bankruptcy protection. While the Wall Street Journal broke this news earlier today, Spirit did not respond immediately to Reuters‘ requests for comment. This development comes at a critical time, as Spirit’s financial difficulties have led to consecutive quarterly losses, sparking doubts over its ability to manage upcoming debt maturities.
Spirit’s share price has reflected these struggles, plummeting 39% in after-hours trading to $1.80. This sharp drop brings the company’s stock losses this year to nearly 80%, while the S&P 500 passenger airlines index climbed 52% in contrast. The airline, despite benefiting from strong demand for travel, has only managed to post a profit in one of the last six quarters, underscoring ongoing challenges in managing its finances effectively.
Operational Adjustments and Asset Sales
Spirit recently projected a 12% year-over-year decline in its adjusted operating margin for the third quarter. This downturn has prompted the airline to take steps aimed at cost reduction and revenue generation. In October, Spirit announced a plan to furlough about 330 pilots by January 31, part of an effort to cut operational costs. Additionally, Spirit is selling 23 of its older Airbus aircraft for $519 million. This sale is expected to add approximately $225 million in liquidity to its operations next year, a vital source of financial relief as the company seeks to stabilize its balance sheet.
Spirit has faced consistent financial challenges despite high demand in the travel sector. The airline has been unable to maintain profitability across multiple quarters, raising questions about its long-term financial sustainability.
