Spirit Airlines (NYSE:SAVE) stock has plummeted over 60% Wednesday after a Wall Street Journal report said the low-cost airline is preparing to file for bankruptcy protection.
The Florida-based budget carrier has struggled with rising losses and large debt obligations, leading to advanced discussions with bondholders on a restructuring plan that could have backing from major creditors, said the WSJ.
Spirit’s bankruptcy filing could occur within weeks, according to WSJ to sources familiar with the matter.
Spirit had recently resumed merger discussions with Frontier Airlines, but Frontier ultimately decided not to move forward with the deal, which would have allowed the two budget carriers to combine and restructure under bankruptcy protection. Frontier declined to comment on the decision, noted the publication.
In a statement on Tuesday, Spirit confirmed it is engaged in constructive discussions with bondholders to restructure debts due in 2025 and 2026.
The company said that any resulting “statutory restructuring” would likely eliminate current shareholder equity. However, it added that general creditors, employees, and vendors would likely remain unaffected.
Adding to its financial woes, Spirit announced that its third-quarter filing to the Securities and Exchange Commission would be delayed, citing a significant drop in operating profit margins.
The airline reported its operating margin was 12 percentage points lower than in the same period last year, partly due to higher expenses and lost revenue from ending fees on changes and cancellations.
The airline, known for its low-cost business model with separate charges for add-ons, has recently been hit hard by increased competition and elevated operational costs.
Spirit has already enacted several measures to combat its financial strain, including the sale of 23 planes to GA Telesis for $519 million. However, these efforts are expected to fall short in addressing Spirit’s impending $1.1 billion bond maturity, along with a critical refinancing deadline with its credit card processor in December, according to the WSJ.