US budget carrier Spirit Airlines is preparing to file for bankruptcy protection after merger talks with Frontier broke down.
The airline is in final negotiations with bondholders on a restructuring plan to secure the support of key creditors, the Wall Street Journal reported on Tuesday. It owes more than $3bn.
The company’s stock has fallen by nearly 80 per cent this year, with Spirit saying that its adjusted operating margin in the third quarter is down by 12 per cent from 2023 due to lower revenues and higher expenses.
Revenues are estimated to be around $61mn lower compared to last year, due in part to Spirit no longer charging change and cancellation fees.
It has been reported that share prices in the company fell 45 per cent after the news emerged of its bankruptcy plans.
Spirit said it is in “constructive discussions” with its noteholders that have “remained positive” in attempts to restructure its obligations owed and improve liquidity. This would be carried out in a Chapter 11 bankruptcy process.
In a statement it said that a statutory restructuring will be put into force and lead to the cancellation of its existing equity if an agreement with noteholders is reached. If an agreement is not reached, Spirit will consider all alternatives.
