Spirit Airlines stock price takes a nosedive after report of possible bankruptcy. What’s happening with the low-cost airline?

Shares of Spirit Airlines (NYSE: SAVE) are crashing in premarket trading as of the time of this writing. The stock is down nearly 40% to just $1.36 per share. Yesterday, SAVE shares closed down 3.45% to $2.24.

The main reason for Spirit’s stock crash seems to be linked to a report from The Wall Street Journal yesterday that says the beleaguered airline is discussing a potential bankruptcy filing. Here’s what you need to know.

What’s happened?

Yesterday, the WSJ reported that Spirit Airlines was in discussions with bondholders for a potential bankruptcy filing. As a result of that report, Spirit Airlines shares crashed in premarket trading this morning.

SAVE shares are currently trading down nearly 40% before the opening bell, sitting around $1.36 per share. This means SAVE shares have lost over 86% of their value since the beginning of the year.

Why is Spirit Airlines considering bankruptcy?

The low-cost airline has been facing financial difficulties for years. As the WSJ notes, Spirit has not seen an annual profit since before the Covid-19 pandemic. This has caused Spirit to accumulate mounds of debt.

But the biggest blow to Spirit happened earlier this year. The airline had been in talks with JetBlue to be acquired by the company, the purchase of which would have helped Spirit with its debt load. Though JetBlue agreed to buy Spirit in 2022, the acquisition was challenged by the Department of Justice (DOJ), which alleged that the acquisition would harm consumer choice and the price of tickets.

In January of this year, a federal judge sided with the DOJ and blocked the Spirit-JetBlue merger. Spirit’s shares crashed by over 45% following the news. With the merger off, Spirit’s financial challenges remained unchanged.

The immediate problem for Spirit Airlines now, according to the WSJ, is that its $3.3 billion debt load is facing maturities, with over $1.1 billion in secured bonds due in fewer than 12 months. This is why Spirit is now reportedly in talks with its bondholders to get their support for Chapter 11 bankruptcy protection.

How have these problems affected passengers and workers?

Even though Spirit Airlines has not filed for bankruptcy yet, its financial woes have already impacted customers. As the WSJ notes, Spirit has already cut dozens of routes for November and December—two of the busiest travel months due to the holiday period.

And in September, Spirit furloughed 186 pilots as the airline sought to cut costs where it could.

When will Spirit file for bankruptcy?

It’s important to note that Spirit has not commented specifically on the WSJ‘s report, nor has there been any official bankruptcy filing. But if the airline does file for bankruptcy, the timing of the filing would not be imminent, according to people familiar with the discussions who spoke to the WSJ.

What has Spirit said about its financial woes?

Reached for comment about the WSJ’s report, a Spirit spokesperson referred Fast Company to recent public remarks made by CEO Ted Christie, who addressed discussions that the airline was having with its bondholders about the coming maturities.

“Because those conversations are ongoing, we are not going to go into detail or take any questions on this topic or speculate on potential outcomes,” Christie said on an August financial call. “Needless to say, it is a priority and we are focused on securing the best outcome for the business as quickly as possible.”

Spirit Airlines was founded as Charter One Airlines in 1983. It is based in Dania Beach, Florida. As of the end of 2023, the airline had 13,167 active employees, including 3,561 pilots and 6,208 flight attendants, according to the company’s most recent 10-K filing with the U.S. Securities and Exchange Commission (SEC).