The international airlines industry has been struggling since the Covid-19 stalled air travel beginning in 2020 with dozens of air carriers filing for bankruptcy since the pandemic began.
In addition to Covid, airlines have been facing increased operating costs caused by inflation and higher interest rates that have reduced liquidity.
💸💰 Don't miss the move: Subscribe to TheStreet's free daily newsletter 💰💸
About 13 airlines around the world ceased operations in 2022, according to Allplane.tv, including former U.S. carrier ExpressJet, which rebooted as aha! Other airlines that shut down included Genghis Khan Airlines from China, Blue Air from Romania, and Tel Aviv Air based in Germany.
Related: Troubled airline gets more painful stock price news
Another 18 airlines closed down in 2023, including GoFirst in India, Flyr from Norway, and Cascadia Air out of British Columbia, Canada, and in 2024, 14 airlines have ceased operations so far, including Lynx Air in Canada, LIAT of Antigua and Barbuda, and OTT Airlines in China.
And now, a major U.S. airline is getting close to filing bankruptcy to reorganize, but there's no talk of it shutting down.
Shutterstock
Spirit Airlines prepares to file bankruptcy
Distressed low-budget carrier Spirit Airlines (SAVE) is planning to file for Chapter 11 bankruptcy protection within weeks after a merger deal with rival Frontier Airlines collapsed and it struggles with massive debt coming due in 2025 and 2026, people familiar with the matter told Bloomberg.
Spirit raised a red flag signaling an impending bankruptcy filing when it released a statement on Nov. 12 that it could not file its 2024 third-quarter report on Securities and Exchange Commission Form 10-Q by its required deadline without unreasonable effort or expense.
The Dania Beach, Fla.-based airline said it was having discussions with holders of about $1 billion in senior secured notes due in 2025 and about $500 million of unsecured convertible senior notes due in 2026. The company said it was also exploring strategic alternatives and ways to improve its liquidity.
Related: Popular pizza chain files for Chapter 11 bankruptcy
If Spirit reaches an agreement with its lenders, it would likely come in the form of a restructuring support agreement that would hand equity in the company to its lenders as part of a Chapter 11 bankruptcy filing, as the company indicated in its statement.
More bankruptcy stories:
- Another popular pizza chain files for Chapter 7 bankruptcy
- Distressed retail chains file for Chapter 11 bankruptcy
- Iconic restaurant chain files bankruptcy after closing locations
"If a definitive agreement with such 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, is expected to lead to the cancellation of the company's existing equity," the statement said.
"If a definitive agreement with noteholders is not reached, the company will consider all alternatives," it said.
Those alternatives could include either a sale of substantially all of its assets through a Section 363 bankruptcy auction to qualified bidders or a liquidation of all of its assets and closure of the business.
Revenues expects to drop, expenses expected to rise
Spirit in the statement said that it expected its third-quarter 2024 operating margin and adjusted operating margin to each be about 12 percentage points lower than results from the third quarter of 2023 due to lower total operating revenues and higher total operating expenses.
The company estimated total operating revenues to have decreased by $61 million in the third quarter of 2024 compared to the same period a year earlier due to lower average yields, including the negative impact of the company no longer charging for change and cancellation fees.
Total operating expenses are expected to have increased by about $46 million in the third quarter of 2024 and adjusted operating expenses are estimated to have increased by about $52 million compared to the same period in 2023.
Total operating expenses and adjusted operating expenses are estimated to be higher year-over-year primarily due to an increase in aircraft rent expenses, other operating expenses, salaries, wages and benefits, landing fees, and other rent expenses. Those increases were partially offset by a decrease in aircraft fuel expense.
As all of this bad news was hitting the fan, shares of Spirit declined by almost 60% on Nov. 13 and has fallen by over 90% this year. The airline's stock closed up 0.76% on Nov. 14 at $1.32 per share.
Related: Veteran fund manager sees world of pain coming for stocks
