Spirit Airlines prepares for bankruptcy – sparking fears of mass route cancellations across America

Spirit Airlines is preparing to file for bankruptcy protection after merger talks with Frontier Airlines took a nosedive – sparking fear among fliers about mass cancellations.

After news broke of the merger’s failure, the troubled airline’s stock price fell 45 percent in just seconds, wiping out hundreds of millions in the low-cost carrier’s market value.

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 tonight. There is a debt of more than 3 billion dollars.

The airline could move forward with its bankruptcy filing within weeks, sources familiar with the matter told the WSJ.

Already this year it has scaled back its growth plans, laid off staff and set out a plan to sell 23 aircraft. Spirit is expected to file for Chapter 11, a form of bankruptcy that will allow the company to continue operating while it tries to reduce its debt.

However, this could mean a significant reduction in routes and staffing. If cost savings fall short, the airline could face the prospect of a complete shutdown.

Spirit Airlines is reportedly planning to file for bankruptcy after its failed merger with JetBlue

Spirit Airlines did not immediately respond to a request for comment.

The carrier has been losing money despite strong travel demand.

Some of the massive $3.3 billion debt will soon have to be repaid, including more than $1.1 billion in covered bonds maturing within a year.

The company had been facing an Oct. 21 deadline from its credit card processor to refinance or renew these notes.

Last month, Spirit said it would lay off about 330 pilots by Jan. 31 as part of its efforts to cut costs and shore up its finances.

The country has failed to make a profit in the past five out of six quarters, raising doubts about its ability to manage looming debt maturities.

Spirit has been struggling with losses and declining revenues since the pandemic. While it may have made a profit in some quarters, it hasn’t made an annual profit even before the pandemic.

As travelers began taking to the skies again, many turned to larger airlines, leaving Spirit and other budget airlines struggling to gain a foothold in the market.

Frontier Airlines and Spirit Airlines initially planned to merge in 2022, but JetBlue Airways came in with a higher offer. That convinced Spirit’s shareholders.

Spirit executives saw the merger with JetBlue as a way to regain market share, but the Justice Department argued that such a deal would violate antitrust laws, and a judge agreed.

Spirit Airlines CEO Ted Christie said earlier in June that the airline was not considering filing for Chapter 11 bankruptcy, saying instead that he was “encouraged” by the plan it put in place after the deal with JetBlue fell through.

Spirit executives saw the merger with JetBlue as a way to regain market share, but the Justice Department argued that such a deal would violate antitrust laws.

The judge ruled in January that the merged company would harm travelers who rely on Spirit’s low fares, saying it would reduce competition.

As a result, JetBlue withdrew from a merger deal.

Spirit was in talks with Frontier again in October in hopes of reviving merger talks. But Frontier walked away.

Since the start of the year, shares have fallen more than 86 percent.