The publication of talks with investors involving a possible bankruptcy filing sent the shares of Spirit Airlines tumbling this week.
In March this year, JetBlue and Spirit Airlines gave up on their hopes for a merger. Had their plans gone ahead, the joined airline would have been the fifth-largest in the country and would have operated under JetBlue’s banner as a leisure carrier, rather than an Ultra Low Cost Carrier.
That move away from Spirit’s ULCC model was the main reason why a federal judge sided with the U.S. Department of Justice and blocked the $3.8 billion deal. The reasoning was that the flying public would suffer from rising ticket prices, and a reduction of available seats. The latter was because Spirit’s planes would be fitted with fewer seats after the transition.
However, soon after JetBlue’s purchase of Spirit Airlines failed, Industry observers indicated that a bankruptcy or reorganization of Spirit was in the cards. And, somewhat ironically, Spirit later had to follow the example of other low-cost operators and introduce plans for premium seating options.
Spirit Airlines Bankruptcy – Other Options?
This week, news emerged that Spirit Airlines is discussing the terms of a possible bankruptcy with bondholders. Such a Spirit Airlines bankruptcy isn’t imminent, but the possibility it could happen obviously hit the airline’s share price.
The airline’s other options included restructuring its debt outside of any bankruptcy proceedings. Spirit has faced these issues because of a bad combination of overcapacity in certain routes, and because of out-of-service aircraft due to unscheduled engine maintenance requirements.
Spirit Airlines CEO Ted Christie wouldn’t comment on the possibility of bankruptcy proceedings for the airline. The bonds the airline is in discussions for are up for repayment in 2025 and 2026. The Spirit CEO stated that the company wants to secure the “…best outcome for the business as quickly as possible”.
Spirit’s financial position at the start of its merger talks with JetBlue caused many to question JetBlue’s initial decision to pursue this deal. Spirit was a better fit for a tie-up with Frontier, which was first airline to try to buy Spirit in February 2022.
JetBlue might not have been in danger of bankruptcy by purchasing Spirit Airlines, but the deal would have been a financial strain for the leisure carrier. JetBlue hoped to benefit from Spirit’s network in Florida and the Caribbean.
