Will Spirit Airlines go bankrupt? Stock price collapses after merger talks with Frontier reportedly end

Shares in Spirit Airlines (NYSE: SAVE) are trading down over 64% in premarket as of this writing. SAVE stock is currently hovering around $1.14 per share, having closed at $3.22 per share yesterday. The reason behind the SAVE stock price drop? Reports say the low-cost air carrier could file for bankruptcy within weeks. Here’s what you need to know.

Frontier merger talks reportedly end

Back in 2022, Frontier Airlines had intended to buy Spirit, but its offer was usurped by a higher one from competitor JetBlue. Yet in January of this year, a federal court agreed with the Department of Justice (DOJ) that a Spirit-JetBlue merger could harm competition and consumer prices. It blocked the merger.

Since then, Spirit’s problems have been mounting. In the immediate aftermath of the judge’s ruling, its shares crashed from over $15 apiece to below $5 per share. And its finances haven’t been good either. It has over $1.1 billion in secured bonds due in less than a year. Its debt is one of the reasons that Spirit was reported in early October to be considering filing for bankruptcy.

However, as part of its bankruptcy plans, Spirit was once again reportedly in talks to merge with Frontier via a broader bankruptcy restructuring. But now the Wall Street Journal is reporting that Frontier has decided not to move forward with these merger talks at this time. 

Spirit bankruptcy reportedly imminent

In addition to Spirit’s talks with Frontier failing, the WSJ also reports that Spirit may now file for bankruptcy “within weeks.”

The airline also announced yesterday that it had filed a Form 12b-25 with the Securities and Exchange Commission (SEC), in which it notified the agency that it would delay its Form 10-Q report for the quarter ended September 30, 2024 “without unreasonable effort or expense.”

Spirit went on to disclose that it is in discussion with a supermajority of bondholders to restructure its debts that are coming due within the next year. It says an agreement could result in canceling the company’s current equity, but that any agreement “is not expected to impair general unsecured creditors, employees, customers, vendors, suppliers, aircraft lessors or holders of secured aircraft indebtedness.”

Spirit says none of this will impact its guests and that customers can book flights and use the airline as they normally would.

Spirit also revealed its estimated Q3 financials, including that its operating margin and adjusted operating margin would be 12 points lower than the same quarter a year earlier and that total operating expenses are estimated to have increased by around $46 million versus the same quarter a year earlier.

Reached for comment, Spirit referred Fast Company to its Form 12b-25. Frontier did not respond to a request for comment.

SAVE shares plunge

After yesterday’s WSJ report and Spirit’s Form 12b-25 filing, shares in the airline crashed, falling 64% as of this writing. 

What’s interesting is that before today’s crash, SAVE shares had actually been up 100% over the past month. The stock had previously reached lows of $1.60 in the first part of October after it was reported that Spirit was considering bankruptcy. Still, it recovered to as high as $3.40 earlier this week after hopes that a restructuring could help revive the company’s future.

Now, those hopes look to be dimmed, and as a result, Spirit shares are trading at a 52-week low in premarket. As of the close of the bell yesterday, SAVE shares had fallen over 80% year-to-date.

This story has been updated with Spirit’s response to our inquiry and to clarify that its 10-Q has been delayed but not canceled.