Spirit Charts Uncertain Path After Blocked Sale

Alas, Spirit Airlines may soon be with us in spirit only.

A federal judge ruled earlier this week against the budget airline’s planned $3.8 billion sale to JetBlue, arguing that a merger could harm consumer’s access to cheap airfare. Spirit, which could still appeal the decision, has essentially crafted its response: Without a merger, we’re toast, and then no one will have budget airfares.

Spirited Away

Spirit’s problems began three years ago, when major airline carriers started dropping prices to get travelers back into the post-pandemic skies — why kill your back cramming into a Spirit seat when a cozy economy-class ticket on United is just $40 more? The company now carries about $1.1 billion in debt. And on Wednesday, with a merger at least tentatively off the table, Fitch Ratings released a report warning about the company’s ability to refinance.

Other onlookers are similarly pessimistic: “We are not (yet) predicting an immediate Chapter 11 filing, just an acknowledgment that we cannot reasonably identify a viable return to profitability any time soon,” JPMorgan Chase analysts wrote Tuesday.

Now, Spirit has to find a flight path forward — literally and figuratively:

• Just weeks ago, Spirit paid down $465 million in debt and raised $419 million in cash by selling or leasing back more than 24 planes in its fleet, according to a Wall Street Journal report on Thursday.
• The fire sale could lead to almost the exact opposite of what the federal judge wanted after blocking the merger — at least, according to some. “[A liquidation] would result in the permanent reduction of supply as lessors would look to reallocate aircraft out of the U.S.,” Conor Cunningham, a Melius Research analyst, recently wrote. It’s no joy ride for Spirit and its investors — its share price plummeted 60% over the course of this week, although some surprisingly strong financial results gave it a lift on Friday morning.

Heading South: As for that other airline in the news for the wrong reasons, four passengers from Alaska Airlines Flight 1282 filed a lawsuit Wednesday against the airline after the fuselage door blew off shortly after takeoff last month, prompting an emergency landing. But aircraft defects are no stranger to Spirit, either. The budget flyer saw scores of its Airbus planes recalled last year after parts-maker RTX found flaws in its turbofan engines. Flying may still be safer than driving, but it seems a lot more scary these days, huh?