Spirit Airlines Drops Over 40% Amid Bankruptcy Discussions

Spirit Airlines Inc. SAVE experienced a significant drop of over 40% in pre-market trading on Friday. This decline follows reports of the airline engaging in bankruptcy talks with bondholders.

At the time of writing, it was trading at $1.35 while it closed at $2.24 on Wednesday, as per Benzinga Pro.

The budget airline is contemplating a Chapter 11 filing as it faces severe financial difficulties. The discussions primarily aim to secure bondholder and creditor support for a potential bankruptcy filing, according to a report by The Wall Street Journal on Thursday.

Spirit’s financial strain is largely due to a $3.3 billion debt, including over $1.1 billion in secured bonds that mature within a year. The company must address these notes by Oct. 21 to meet its credit card processor’s deadline.

CEO Ted Christie acknowledged in August that the airline is actively negotiating with bondholders’ advisers to manage these debts. He emphasized the priority of securing a favorable outcome for the business while enhancing performance and guest experience.

Spirit’s financial troubles have been worsened by its failure to achieve annual profitability since the COVID-19 pandemic. The airline plans to cut capacity by nearly 20% in the fourth quarter, further impacted by the recall of Pratt & Whitney engines, which has grounded part of its fleet and led to pilot furloughs.

In March, Spirit scraped off its $3.8 billion merger agreement with JetBlue Airways Corp JBLU. After the talks about Spirit’s bankruptcy, JetBlue was up by 5.16%,

Read Next: