After a federal judge early this year cited antitrust concerns and blocked JetBlue Airways (JBLU) from acquiring Spirit Airlines (SAVE) , the low-cost airline's financial situation has weakened.
Multiple industry analysts have speculated about the prospect of bankruptcy and a report said it was one option Spirit was exploring. But the airline reached a refinancing deal in which deadlines on $1.1 billion of its debt were pushed back until year-end.
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The new arrangement bought time. but the airline still is carrying $3.3 billion in total debt. And Spirit probably won't be able to get out from under that burden simply by reworking flight routes and attracting new passengers.
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Spirit furloughs more pilots to cut costs
On Oct. 30 the Dania Beach, Fla., airline said that it would be furloughing some 330 of its pilots as of Jan. 31.
Last September Spirit put 130 pilots on furlough and downgraded at least 120 of its captains to first officers, aiming to cut costs in 2025.
“We are implementing a series of cost savings initiatives throughout our business, including a reduction in workforce, as part of our comprehensive plan to return to profitability," a Spirit spokesperson said in a statement.
The latest cuts pare about 10% of Spirit’s 3,500 pilots. It's also selling a number of older Airbus planes to grant it greater liquidity for continuing the business.
And Spirit plans to cut its flying capacity by nearly half, to what it was a year ago. Some of this has been done: Spirit had to cancel multiple routes due to a recall of Pratt & Whitney engines and subsequent grounding of the affected planes.
A separate report from The Wall Street Journal says Spirit and Frontier Airlines (FRON) are also discussing a potential merger. The Denver low-cost carrier had been interested in buying Spirit in 2022 but was pushed aside by JetBlue’s bid of $3.8 billion.
JBLU's proposal failed when the Justice Department objected on antitrust grounds.
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Similar antitrust concerns that killed JetBlue’s acquisition plans might arise if the two low-cost airlines decide to merge. The DoJ's biggest concerns were that JetBlue would absorb Spirit, raise prices and leave consumers with fewer airline options.
Spirit stock has been volatile. At last check the stock was trading off 4.2% at $2.41. Three weeks ago, during the talk of a possible bankruptcy filing, the stock traded at $1.40; last November it changed hands above $17.
"Spirit has to address debt payment timing and resizing the fixed cost structure, and it is still unclear if this can be completed with/without Chapter 11," a Raymond James managing director and analyst, Savanthi Syth, told Reuters earlier this month.
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