The future looks grim for Spirit Airlines Inc. as the struggling ultralow-cost carrier grapples with mounting debt. Over the past two years, Spirit’s net debt has skyrocketed from $3.3 billion to a staggering $5.5 billion, with an additional $1 billion in debt due next year.
Recently, a federal judge ruled against JetBlue Airways Corp.’s proposed $3.8 billion bid to acquire Spirit, agreeing with the Justice Department’s concerns about potential harm to competition. As a result, the likelihood of other suitors emerging is slim, especially since the carrier needs to restructure its debt first, according to Citi analyst Stephen Trent.
However, Spirit seems determined to chart a new course. The airline is set to consult with advisors to find a way forward, as reported by The Wall Street Journal.
Fitch Ratings has also sounded the alarm, citing “significant refinancing risk” for Spirit in the coming year. This includes an impending $1.1 billion debt maturity in September 2025 and challenges in improving its balance sheet, such as overcapacity and increased competition in certain leisure-travel markets.
Moreover, Trent predicts that Spirit’s earnings before interest, taxes, depreciation, and amortization won’t turn positive until 2025. Consequently, he downgraded his rating for the airline to sell from hold.
As a result of these financial struggles, Spirit’s stock has plummeted 79% in the past 12 months, in stark contrast to the S&P 500’s 21% gains during the same period.
Also read: JetBlue Dodged a Bullet After Judge Blocked Spirit Acquisition, J.P. Morgan Says