Spirit Airlines is preparing for bankruptcy – raising fears of mass route cancellations across America

Spirit Airlines is preparing to file for bankruptcy protection after merger talks with Frontier Airlines collapsed – sparking fears of mass cancellations among passengers.

After news broke that the merger had collapsed, the troubled airline’s stock price plunged 45 percent within seconds – wiping out hundreds of millions of dollars in market value from the budget airline.

The Florida-based airline is in final negotiations with bondholders on a restructuring plan to secure support from key creditors, the Wall Street Journal reported this evening. It owes more than $3 billion.

The airline could move forward with its bankruptcy filing in the next few weeks, sources familiar with the matter told the WSJ.

Already this year, growth plans have been scaled back, employees have been laid off and a plan to sell 23 aircraft has been signed. Spirit is expected to file for Chapter 11 bankruptcy, a form of bankruptcy that allows the company to continue operations while it tries to reduce its debt.

However, this could result in significant reductions in routes and staff. If cost-cutting efforts fail, the airline could face total closure.

Spirit Airlines is reportedly planning to file for bankruptcy following its failed merger with JetBlue

Spirit Airlines did not immediately respond to a request for comment.

Despite strong travel demand, the airline has been losing money.

Some of the massive $3.3 billion in debt is coming due soon – including more than $1.1 billion in collateralized bonds that are due in less than a year.

The company was given a deadline of October 21 by its credit card processor to refinance or extend these notes.

Last month, Spirit said it would furlough about 330 pilots on Jan. 31 as part of its efforts to cut costs and strengthen its finances.

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 has been struggling with losses and declining revenue since the pandemic. In fact, although the company made profits in some quarters, it had stopped making an annual profit before the pandemic.

As travelers took to the skies again, many turned to larger airlines, leaving Spirit and other low-cost airlines struggling to gain a foothold in the market.

Frontier Airlines and Spirit Airlines had initially planned to merge in 2022, but JetBlue Airways made a higher offer. This convinced Spirit’s shareholders.

Spirit executives saw the merger with JetBlue as a way to regain market share, but the Justice Department argued that such a deal would violate antitrust laws, and a judge agreed.

Spirit Airlines CEO Ted Christie said back in June that the airline was not considering filing for Chapter 11 bankruptcy, but said he was “encouraged” by the plan it had in place following the collapse of its deal with JetBlue have set

Spirit executives saw the merger with JetBlue as a way to regain market share, but the Justice Department argued that such a deal would violate antitrust laws

The judge ruled in January that the combined company would harm travelers who rely on Spirit’s cheap fares and said it would reduce competition.

As a result, JetBlue withdrew from a merger agreement.

Spirit held talks with Frontier again in October, hoping to revive merger talks. But Frontier went away.

Shares have fallen more than 86 percent since the beginning of the year.