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Analysts Predict Bankruptcy for Spirit Airlines
January 18, 2024
The ultra-budget airline Spirit Airlines recently attempted to merge with JetBlue, but when the government blocked the merger, it left the airline company on shaky ground.
Confronted with a challenging third quarter, Spirit Airlines has been thrust into a concerning financial state. The low-cost carrier reported a considerable loss of $157 million. Slashing costs by a targeted $100 million and slowing its airplane orders reveal the urgent maneuvers the company is taking to navigate the unfavorable economic weather.
The future looked somewhat promising with a planned merger with JetBlue, which follows a traditional airline business model closer to the likes of Southwest. However, the government’s intervention to block this merger has thrown Spirit’s flight path into disarray. The blockade has cast a long shadow over the airline’s financial future, leading industry experts to predict a possible bankruptcy.
Notably, Helane Becker, TD Cowen aviation analyst and managing director, has suggested that Spirit is now more likely to file for Chapter 11 bankruptcy and potentially liquidate its assets. “We believe Spirit is likely to look for another buyer … but a more likely scenario is a Chapter 11 filing, followed by a liquidation,” she explained. This theory, though alarming, appears realistic given the severe financial turbulence the airline is currently weathering. Despite the dire predictions, Spirit Airlines is not without options to stay airborne.
In its favor, Spirit has $1.2 billion in available cash and borrowing capacity. An additional lifeline appears in the form of a recent decision to raise $419 million by selling and leasing back some of its aircraft. This financial maneuver could fund a self-initiated Chapter 11 filing, a process that would enable Spirit to restructure its debt and repay creditors over an agreed period.
While the future of Spirit Airlines remains turbulent, the observations by industry analysts give us a glimpse into the potential path the airline may need to traverse.
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