(Reuters) – Fitch Ratings on Friday downgraded Spirit Airlines’ long-term credit rating to “CC” from ‘CCC’, putting it below the low-cost carrier’s North American competitors and warning that a near-term default appears likely.
Earlier this week, the airline said it was in discussions with creditors and continued to explore strategic alternatives to improve liquidity.
Negotiations, with a supermajority of bondholders, remained productive, progressed materially and would resume shortly, it added.
The Dania Beach, Florida-based airline has been losing money despite robust travel demand. It reported losses in five of the past six quarters, raising doubts about its ability to handle upcoming debt obligations.
“Spirit now faces the risk that customers may increasingly choose to book with other airlines for fear of potential bankruptcy, accelerating the company’s cash burn,” Fitch said in its report.
The rating agency expects cash outflows to be about $600 million in 2024, partially offset by proceeds from asset sales and compensation from Pratt & Whitney for not being able to operate planes with engine problems.
Fitch also drew attention to Spirit’s shrinking footprint following its decision to sell 23 of its older Airbus aircraft and lay off 330 pilots in January 2025.
It is among the airlines suffering from problems with RTX’s Pratt & Whitney engines, which forced the airline to ground some of its planes in 2024 and 2025, sending costs soaring.
“Visibility into engine availability is limited, which adds a layer of uncertainty to Fitch’s forecast as it is difficult to predict Spirit’s ability to deploy aircraft,” Fitch said in the report.
Fitch said its recovery analysis assumes Spirit would be reorganized as a going concern in bankruptcy rather than being liquidated.
(Reporting by Aishwarya Jain in Bengaluru; Editing by Shailesh Kuber)
