Spirit Airlines is currently in talks with bondholders over a potential bankruptcy filing, according to a recent Wall Street Journal report. While the airline had initially been exploring out-of-court restructuring options, discussions have now shifted towards reaching an agreement with creditors related to a chapter 11 filing. However, the filing is not imminent at this time. Spirit CEO Ted Christie had previously stated that the carrier was not considering a chapter 11 bankruptcy, but recent developments suggest otherwise.
Since the onset of the pandemic, Spirit Airlines has faced numerous challenges, including financial losses due to a lack of demand, overcapacity in the domestic market, and issues with Pratt & Whitney engines. In the second quarter of this year, the airline reported a significant loss of $192.9 million, a steep decline from the $2.3 million loss reported in the same period last year. With $3.3 billion in debt, including over $1.1 billion in secured bonds due within a year, the carrier is under significant financial pressure.
Spirit is also facing an upcoming deadline in October to renegotiate its debt, particularly relating to an agreement with the U.S. National Bank Association regarding credit card processing payments. Failure to reach a satisfactory agreement could potentially push the airline towards a bankruptcy filing, according to Wall Street analysts. In response to financial challenges, Spirit recently discontinued 32 routes and plans to reduce capacity by 20% during the fourth quarter. The airline has also introduced new measures such as bundled fares and premium seating with blocked middle seats to boost profitability.
The Skift Travel 200 (ST200) index includes the financial performance of nearly 200 travel companies, including airlines, worth over a trillion dollars. The index provides a comprehensive overview of the industry’s performance and can help investors and industry analysts track trends and make informed decisions. The airline sector stocks within the ST200 have been impacted by the ongoing challenges facing the travel industry, with carriers like Spirit facing significant financial pressures. By monitoring the performance of airline stocks, stakeholders can gain valuable insights into the sector’s overall health and outlook.
