Spirit Airlines is considering bankruptcy after a proposed merger with Frontier Airlines fell apart.
The Miramar, Florida-based discount carrier is expected to file for bankruptcy protection against its debts within 10 days or weeks, sources familiar with the matter confirmed to CBS News. The Wall Street Journal first reported the impending bankruptcy filing.
Spirit acknowledged in a filing with the regulator late Tuesday that it is in “active and constructive discussions” with bondholders to restructure its obligations as business problems continue. If the talks are successful, the airline expects that operations will continue and employees and customers will be protected from any consequences.
Spirit declined to comment on the matter.
The company’s stock price plunged after news surfaced of the possible bankruptcy filing, falling nearly 55% to $1.46 in morning trading.
In October, Spirit and Frontier revived merger talks after talks ended in 2022 when JetBlue outbid Frontier, according to the WSJ. A federal judge blocked the JetBlue merger in January due to antitrust concerns.
Spirit, the largest budget airline in the U.S., has lost more than $2.5 billion since the start of 2020 due to a lull in pandemic-era travel. The airline faces looming debt payments totaling more than $1 billion in the coming year, obligations it is unlikely to be able to meet.
In the first six months of 2024, Spirit passengers flew 2% more than the same period last year, but spent 10% less per mile. Revenue per mile from fares fell nearly 20%, contributing to the losses.
At the same time, labor costs have risen and legacy airlines have poached some of Spirit’s customers by offering their own versions of bare-bones tickets to price-conscious fliers.
Spirit said in a filing with regulators in October that it has identified about $80 million in cost-cutting measures that will start early next year. CBS News Miami. These cuts will be driven primarily by a “workforce reduction,” the Florida-based airline said. The airline also announced that it had agreed to sell 23 aircraft to GA Telesis, an aviation services company, for approximately $519 million.
Kris Van Cleave and
contributed to this report.
