Bankruptcy is on the table as the carrier looks to boost its liquidity.
A Spirit A320 in New York (Photo: AirlineGeeks | William Derrickson)
Spirit Airlines announced that it filed a disclosure with the Securities and Exchange Commission stating the carrier is unable to file its Q3 report as the company continues talks with creditors to explore ways of improving liquidity.
In a Form 12b-25 filed with the SEC, Spirit stated that the company is unable to file a quarterly earnings report by its due date without “unreasonable effort or expense.”
The announcement comes as bankruptcy looms over the low-cost carrier after its potential merger with Frontier broke down Tuesday. Spirit’s stock took a massive hit falling by 59.3% at market close on Wednesday following the news.
Spirit has been in active discussions with holders of its senior secured notes due 2025 and convertible senior notes due 2026. The carrier stated that negotiations with most of these noteholders have remained productive and are moving forward in the near term, though they have diverted “significant management time and internal resources from the company’s processes for reviewing and completing its financial statements and related disclosures.”
The airline stated that if an agreement with its noteholders is reached, it would be done so through a “statutory restructuring” that is not expected to impair general unsecured creditors, employees, customers, vendors, suppliers, aircraft lessors, or holders of secured aircraft indebtedness.
However, if put into force, an agreement “is expected to lead to the cancellation of the company’s existing equity.”
“If a definitive agreement with the Noteholders is not reached, the Company will consider all alternatives,” the airline stated.
In the filing, Spirit estimates its Q3 2024 operating margin and adjusted operating margin will be approximately 12% lower than the same period last year. The carrier stated this is due to lower total operating revenues and higher total operating expenses.
“Total operating revenues are estimated to have decreased approximately $61 million compared to the third quarter 2023 primarily due to lower average yields, including the negative impact from the Company no longer charging for change and cancellation fees,” Spirit stated. “Total operating expenses are estimated to have increased approximately $46 million and adjusted operating expenses are estimated to have increased approximately $52 million compared to the third quarter 2023.”
Additionally, total operating expenses and adjusted operating expenses are estimated to be higher year over year mainly due to an increase in aircraft rent expenses, other operating expenses, salaries, wages and benefits, landing fees, and other rent expenses, the carrier said.
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