Spirit Airlines continues “constructive discussions” with creditors

(Reuters) – Spirit Airlines (SAVE) is in constructive discussions with its creditors and continues to explore strategic alternatives to improve liquidity, the ultra-low-cost carrier said on Tuesday.

Negotiations with the vast majority of bondholders remained productive, made material progress and would resume in the near future, it said.

If the agreement fails, this will lead to the cancellation of the existing equity capital and all alternatives will be examined, the statement said.

The company said its third-quarter adjusted operating margin would decline 12% year over year.

Earlier in the day, the Wall Street Journal reported that the company was preparing to file for bankruptcy after merger talks with Frontier Airlines collapsed.

The company did not immediately respond to a Reuters request for comment.

The company’s shares fell 39% to $1.8 in after-hours trading. The stock has fallen nearly 80% this year, while the S&P 500 passenger airline index has gained 52%.

The Dania Beach, Florida-based airline has been losing money despite strong travel demand. The company failed to report a profit in the last five out of six quarters, raising doubts about its ability to manage looming debt maturities.

Spirit said in October that it would furlough about 330 pilots on Jan. 31 as part of its efforts to cut costs and strengthen its finances.

The company is also selling 23 older Airbus aircraft for $519 million. It is estimated that proceeds from the sale will provide $225 million in liquidity next year.

(Reporting by Aishwarya Jain in Bengaluru and Urvi Dugar; Editing by Maju Samuel and Alan Barona)