Spirit Airlines, grappling with financial challenges predating the pandemic, faces prolonged difficulties as its anticipated sale to JetBlue, a lifeline for the airline with $1.1 billion in maturing debt, was thwarted by a federal judge in Boston citing antitrust concerns. Analysts are now speculating on potential bankruptcy for Spirit, with some suggesting a Chapter 11 filing and liquidation as the most likely scenario.
Despite Spirit recently raising $419 million through mortgaging planes, analysts express concerns over the airline’s liquidity and credit profile, with Fitch Ratings indicating increased pressure after the court ruling. Bank of America downgraded Spirit stock to “underperform,” emphasizing the risk of missing debt payments due in September 2025.
The airline’s operational challenges include necessary inspections and potential replacement of Pratt & Whitney engines on many Airbus jets, contributing to an estimated 26 grounded planes in 2024. While Frontier Airlines had previously sought to acquire Spirit, it is currently facing its own challenges and is not positioned for renewed merger discussions.
Spirit shares plummeted 47% on Tuesday and an additional 22% on Wednesday, prompting analysts to underscore the airline’s precarious financial position. In contrast, JetBlue shares experienced a more modest 9% decline, reflecting a potential sigh of relief from investors regarding the stalled acquisition.
The ruling against the JetBlue-Spirit deal raises questions about the fate of Alaska Airlines’ proposed acquisition of Hawaiian Airlines, with analysts suggesting potential regulatory scrutiny. The government’s success in blocking recent airline mergers may cast a shadow over future industry consolidation.
