Spirit Airlines is preparing to file for bankruptcy protection after merger talks with Frontier Airlines fell through, a report says.
After the news broke at 5.30pm, the share price slumped 40 percent in seconds, wiping hundreds of millions of dollars off the value of the low cost carrier.
The Florida-based airline is in final negotiations with bondholders on a restructuring plan to secure the support of key creditors, the Wall Street Journal reported this evening.
With losses mounting and significant debt maturities on the horizon, Spirit’s financial position has become increasingly precarious.
The airline could move forward with its bankruptcy filing within the next few weeks, sources familiar with the matter told the WSJ.
The move comes just months after JetBlue pulled out of a merger agreement, but any bankruptcy filings will not be made imminently, the Journal reports.
Spirit Airlines is reportedly planning to file for bankruptcy following its failed merger with JetBlue
Spirit has been struggling with losses and declining revenue since the pandemic.
A chunk of its huge $3.3billion debt is due soon – including more than $1.1billion of secured bonds that are due in less than a year.
It had faced an October 21 deadline from its credit card processor to refinance or extend those notes.
CEO Ted Christie previously said in June that the airline was not considering filing for Chapter 11 bankruptcy, instead saying he was ‘encouraged’ by the plan it had in place after the deal with JetBlue fell through.
But in an August earnings call, Christie admitted that the company is engaged in productive conversations with advisors to address the maturities.
Spirit has not turned an annual profit since even before the COVID pandemic.
Then as travelers began to once again take to the skies, many turned to larger airlines, leaving Spirit and other budget airlines struggling to get a foothold in the market.
The budget airline was also among the hardest hit by a recall of Pratt & Whitney-geared turbofan engines, which grounded more than 10 percent of its fleet this year and clipped its growth.
Spirit executives saw the merger with JetBlue as a way to claw back a market share, but the Department of Justice argued that such a deal would violate anti-trust laws, and Boston District Court Judge William Young agreed.
He ruled in January that the merged company would harm travelers who rely on Spirit’s low fares and said it would reduce competition.
At first, both JetBlue and Spirit argued that they would continue pushing to extend the ‘JetBlue Effect,’ which has historically pressured larger airlines to set more affordable fares.
Executives at the two airlines insisted their combination would benefit customers and boost their ability to compete with dominant US carriers.
But by March, both airlines determined they could not meet the conditions set by the judge to allow the merger to move forward.

Spirit Airlines CEO Ted Christie previously said in June that the airline was not considering filing for Chapter 11 bankruptcy, instead saying he was ‘encouraged’ by the plan it had in place after the deal with JetBlue fell through

Spirit executives saw the merger with JetBlue as a way to claw back a market share, but the Department of Justice argued that such a deal would violate anti-trust laws
Since then, Spirit has announced it would cut dozens of routes for the busy holiday season, and furloughed 186 pilots as a cost-cutting measure.
It is also now planning to contract its capacity by nearly 20 percent in the fourth quarter of this year from the same period last year, aviation industry analysts from Deutsche Bank announced this week.
Still, Spirit is continuing to struggle, with share prices down more than 30 percent in after-hours trading on Thursday.
Over the past year, its shares were down more than 86 percent.