Spirit Airlines, Inc. (SAVE) shares are taking a nosedive on Friday after reports surfaced that the struggling airline is considering filing for bankruptcy. The Wall Street Journal reported that Spirit has been in talks with bondholders and creditors to secure support for a Chapter 11 bankruptcy filing. This news comes on the heels of a federal court blocking the company’s merger with JetBlue back in January, a deal that both airlines ultimately abandoned due to the legal and regulatory hurdles they faced.
Since the failed merger, Spirit has been scaling back its operations, cutting dozens of routes for November and December and planning to reduce capacity by almost 20% in the fourth quarter. The airline has been reporting losses almost every quarter since February 2020, including an adjusted net loss of $157.9 million in the second quarter of fiscal year 2024.
The potential bankruptcy filing raises significant questions about the future of Spirit Airlines. While the airline doesn’t currently pay dividends, it has the option to return value to shareholders through other means, like share buyback programs. However, with its current financial situation, it remains uncertain whether Spirit will be able to implement any such programs in the near future.
At the time of writing, Spirit stock is trading 26.8% lower at $1.63. The news of potential bankruptcy has clearly sent shockwaves through the market, highlighting the significant challenges faced by the airline industry in a post-pandemic environment.
Investors are now left to grapple with the implications of this news and assess the potential impact on Spirit Airlines’ future.
It is important to note that this information is based on publicly available reports and should not be considered investment advice.
