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Spirit Airlines (SAVE) is throwing in the towel after a series of failed merger attempts left it scrambling to sort out its balance sheet.
The ultra-low-cost carrier announced Monday that it has filed for Chapter 11 bankruptcy, allowing it to restructure and reduce some of its debts. Under a prearranged agreement with its bondholders, Spirit has received an additional $300 million in debtor-in-possession financing, which will allow it to continue operating while it completes the restructuring.
Spirit passengers can continue flying and booking with the carrier throughout the bankruptcy process, the company said in an open letter to customers. The Chapter 11 process is expected to be completed by the first quarter of 2025.
Shares of Spirit fell almost 6% in pre-market trading Monday, after closing at $1.08 per share Friday. The airline’s stock has fallen 94% year-to-date.
The bankruptcy filing comes after a potential merger with Frontier Airlines (ULCC-0.17%) reportedly fell apart, ending what appeared to be Spirit’s last-ditch effort to avoid a bankruptcy filing. The two airlines had been in on-and-off merger talks since 2016. In February 2022, the companies announced a $2.9 billion definitive merger agreement. That deal fell apart in July of that year.
The renewed talks between Spirit and Frontier dovetailed with another failed attempt at merging with JetBlue (JBLU+3.08%). That deal also crumbled when a federal judge blocked the merger over concerns that the combination of the two budget airlines would be anti-competitive. Spirit and JetBlue called off their $3.8 billion deal in March.
The writing was on the wall after the company revealed last Wednesday that it wouldn’t even be able to release its quarterly report on time.
In a regulatory filing last month, the company said it had pushed back its deadline to refinance roughly $1.1 billion in debt until Dec. 23. Spirit also said it had borrowed the entirety of a $300 million revolving credit facility it had set up in March 2020. Borrowings under that facility are scheduled to mature at the end of September 2026. The company also reiterated at the time that it expected to end 2024 with more than $1 billion in liquidity.