Spirit Airlines Explores Restructuring Options After Fed Judge Kills JetBlue Deal

Shares of Spirit Airlines tanked again, plunging another 24% around midday, in reaction to a Wall Street Journal article suggesting that the budget airline might explore restructuring.

This comes after a federal judge halted JetBlue Airways’ deal to merge with Spirit on Tuesday. 

Make that six days later

SPIRIT AIRLINES EXPLORES RESTRUCTURING OPTIONS: WSJ https://t.co/5nlmMQe6o0

— zerohedge (@zerohedge) January 18, 2024

People familiar with the situation said Spirit executives plan to meet with advisers about its future. The airline faces a massive wall of near-term debt maturities, upwards of $1.1 billion due September 2025. And a Fitch Ratings report on Wednesday warned the airline will have trouble refinancing the debt.

Spirit problems began on Tuesday when a federal judge in Boston blocked the $3.8 billion JetBlue deal. The judge sided with the Justice Department (Biden admin), indicating that the merger would have reduced competition and harmed travelers who rely on Spirit’s low fares. 

A spokesperson for Spirit told WSJ, “While we are disappointed with this outcome, we are confident in our strengths and strategy. Spirit has been taking, and will continue to take, prudent steps to ensure the strength of its balance sheet and ongoing operations.”

On Tuesday evening, TD Cowen analyst Helene Becker told Yahoo Finance Live in a TV interview that the “merger” story between the airlines was over. She said, “Spirit, however, we think they’ve got bigger issues … the airline is going into chapter 11 sooner rather than later if you’re going to provide your own debtor-in-possession financing, which is what we think Spirit will do.” 

In reaction to the WSJ report, Spirit shares are down 24% on the session. For the week, shares are down 68%. The company’s $1.1 billion 8% secured bond due 2025 trades around 52 cents. 

With Spirit effectively being forced into bankruptcy by the Feds, it’s only a matter of time before the company’s assets are bought in court for a hefty discount. So what’s next for Spirit’s 12,000 employees? …and what will happen to ticket prices after?