Thursday, 26 December 2024

American-Based Airline Reportedly Near Bankruptcy

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Ultra-low-cost carrier Spirit Airlines is reportedly on the verge of bankruptcy due to excessive costs and mounting debt.

According to the U.S. Sun, the Florida-based airline has around $3 billion worth of debts.

“Spirit Airlines, known for its cheap flights prices and overpriced baggage fees and other services, is preparing to file for bankruptcy,” Rawsalerts wrote.

There were reports of a potential merger between Spirit and rival ultra-low-cost carrier Frontier Airlines, but those discussions fell apart.

The airline reportedly could file for bankruptcy within weeks.

Per Forbes:

In a filing late Tuesday, Spirit said it was in “active and constructive discussions” with a “supermajority” of its secured bondholders for a debt restructuring deal—which Bloomberg reports could be carried out in a Chapter 11 bankruptcy process.

The company noted that if the agreement with its bondholders is reached, it is “expected to lead to the cancellation of the Company’s existing equity.”

The low-cost carrier’s stock price cratered more than 62.7% in after-hours trading to $1.20.

The company also said it will be unable to file its third-quarter earnings in time due to the ongoing discussions with creditors.

In a snapshot of its numbers for Q3, the company says its operating margin was down approximately 12% year-over-year and its operating revenues were down roughly $61 million year-over-year.

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From The U.S. Sun:

The move was taken as part of efforts to try and boost profitability.

“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,” the spokesperson said.

Bosses are reportedly planning to cut costs by around $80 million next year.

The uncertainty has sparked fears that routes could be canceled, potentially plunging travelers into jeopardy.

It comes after the company’s CEO, Ted Christie, blasted the state of the airline industry, warning in an earnings call that customers are “long-term losers.”

“Today, nearly all the profits of the entire U.S. airline industry are concentrated in just two companies, while the smaller non-legacy carriers scrambled to restore profitability in what seems ever more like a rigged game,” he said.

Spirit was on the verge of merging with JetBlue, but a federal judge blocked the deal earlier this year.


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