New York — Spirit Airlines announced on Wednesday that it will not be releasing its quarterly financial results as the company prioritizes ongoing discussions with bondholders aimed at debt restructuring.
The airline, known for its budget-friendly services, has faced challenges in the wake of the downturn in air travel caused by the pandemic, alongside a failed attempt to be acquired by JetBlue.
In a recent regulatory filing, Spirit indicated that the negotiations to reduce its debt have shown promise. If these discussions are fruitful, the airline anticipates that its normal operations will proceed without negative consequences for its employees and customers; however, the restructuring is likely to result in the cancellation of its existing stock.
According to Spirit’s filing on Wednesday, it stated, “The negotiations … have progressed significantly and remain ongoing, but have also absorbed considerable management time and internal resources, affecting the company’s ability to finalize and disclose its financial statements.”
During early trading, the Miramar, Florida-based airline saw its stock plummet by 55%, dropping to $1.77.
Spirit Airlines also mentioned that if a satisfactory deal with bondholders is not reached, it will explore all alternatives. The Wall Street Journal reported on Tuesday, citing unnamed sources, that the airline is considering the terms of a potential bankruptcy filing with its bondholders.
The company provided insights regarding its expected earnings, predicting lower revenue for the third quarter compared to the previous year. While operating expenses are anticipated to rise due to increased aircraft rental costs and salaries, these will be somewhat mitigated by a decrease in fuel expenses.
As the largest budget airline in the United States, Spirit has incurred losses exceeding $2.5 billion since 2020. The airline is also facing imminent debt obligations totaling over $1 billion in the coming year.
Despite the financial difficulties, Spirit Airlines is still seeing passenger traffic, though at reduced fare levels.
During the first half of the year, passenger numbers rose by 2% compared to the same timeframe last year. However, ticket prices decreased by 10% per mile, and revenue from fares plummeted nearly 20%, exacerbating the airline’s financial challenges.
This downward trend is not new; Spirit has struggled to achieve profitability even as travel resumed post-pandemic. Various factors contribute to this downturn, including rising operational costs, particularly labor expenses. Additionally, larger U.S. airlines are capturing budget-conscious travelers by providing their own low-cost fare options, while a surge in the number of flights has led to diminished prices in the leisure travel sector, which is Spirit’s key market.
In 2022, Frontier Airlines attempted to merge with Spirit but was outdone by JetBlue’s proposal. However, the Justice Department intervened to block the $3.8 billion merger, citing concerns over increased prices for consumers reliant on low fares, a stance supported by a federal judge’s ruling in January. Subsequently, JetBlue and Spirit abandoned their merger plans two months later.
Airline bankruptcies were prevalent during the 1990s and 2000s, as carriers contended with aggressive competition, heightened labor expenses, and sudden increases in jet fuel prices. Notable airlines like PanAm, TWA, Northwest, Continental, United, and Delta either collapsed or utilized favorable legal frameworks to renegotiate debts and continue operations.
The last major U.S. airline bankruptcy concluded when American Airlines emerged from Chapter 11 protection and merged with US Airways in December 2013.