Ultra-low-cost carrier Spirit Airlines is preparing to take drastic steps as it grapples with financial difficulties. On Thursday, the company announced that it had signed a $519 million deal with aviation firm GA Telesis to sell part of its fleet. The sale is expected to provide Spirit with a cash flow of $225 million by the end of next year, aimed at boosting its liquidity.
Spirit, which has recently been the subject of bankruptcy rumors, plans to implement a cost-cutting initiative in 2024 that is projected to save the airline $80 million annually. This move comes after a federal court blocked Spirit’s planned $3.8 billion merger with JetBlue Airways, citing antitrust concerns. The failed merger has exacerbated Spirit’s financial woes, further fueling investor concerns about a potential bankruptcy.
However, Spirit’s third-quarter projections exceeded expectations, and the airline announced that its adjusted operating margin would remain positive, which sparked a recovery in its stock. Spirit’s shares surged by over 8% in pre-market trading on the back of these positive forecasts. The airline is set to release its third-quarter earnings report in mid-November.
There are also talks that Spirit may be considering a merger with another low-cost carrier, Frontier Airlines. Reports suggest that early discussions have begun to revive a previously proposed merger with Frontier. This potential deal could play a crucial role in Spirit’s debt restructuring plans. Last week, Spirit extended the deadline for refinancing $1.1 billion of its debt to December 23 and fully utilized a $300 million revolving credit facility established in March 2020.
With its new strategy and cost-cutting measures, Spirit aims not only to avoid bankruptcy but to strengthen its position in the industry and secure its future.
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