Spirit Airlines Planning to File Bankruptcy Petition with SEC

Spirit Airlines, the Florida-based ultra-low cost carrier, on Tuesday announced that it had filed a Form 12b-25 with the US Securities and Exchange Commission (SEC), indicating that it was preparing to file for bankruptcy protection.

The filing is expected to be available on the SEC’s EDGAR filing system on 13 November 2024, prior to the opening of the market session. The airlines’ decision was made after its merger talks with Denver-based Frontier Holdings failed, according to Wall Street Journal.

Last week, Spirit Airlines said that it has reached an agreement with its credit card processor US Bank National Association to extend a debt refinancing deadline by two months until December 23.

Spirit Airlines almost reached an understanding for a takeover by Frontier Group Holdings for $2.9 billion in February 2022, but JetBlue Airways made an unsolicited offer of $3.8 billion in July last year, to acquire the airline.

The deal with JetBlue Airways, however, was blocked by the US Department of Justice in March this year on the plea that the planned merger will put travel out of reach for many cost-conscious travellers.

In the Form-12b-25, Spirit Airlines said that the company was unable to file its quarterly report on Form 10-Q for the quarter ended 30 September 2024 by the prescribed due date without unreasonable effort or expense.

As previously disclosed, the company has been in active and constructive discussions with holders of its senior secured notes due 2025 and convertible senior notes due 2026 (collectively, the Noteholders) with respect to restructuring the obligations owed by the company to the Noteholders, as well as exploring strategic alternatives and other ways to improve liquidity for the Company.

The negotiations, with a supermajority of the Noteholders, have remained productive, have advanced materially and are continuing in the near term, but have also diverted significant management time and internal resources from the company’s processes for reviewing and completing its financial statements and related disclosures.

“If a definitive agreement with the Noteholders is reached and documented, it would be effectuated 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, but, if effectuated, it 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,” Spirit Airlines said.

The company estimates its Q3-2024 operating margin and adjusted operating margin will each be approximately 12 percentage points lower than the operating margin and adjusted operating margin reported for the same period last year due to lower total operating revenues and higher total operating expenses.

Operating Revenues Down

Total operating revenues were estimated to have decreased approximately $61 million compared with the third quarter of 2023 primarily due to lower average yields, including the negative impact from the company no longer charging for change and cancellation fees.

Total operating expenses were 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.

“The total operating expenses and adjusted operating expenses are estimated to be higher year over year primarily due to an increase in aircraft rent expense, other operating expense, salaries, wages and benefits, and landing fees and other rents expense. These increases were partially offset by a decrease in aircraft fuel expense,” the airlines said.