With Spirit Airlines (SAVE) just pushing off bankruptcy by refinancing its debt so that it's not due until the end of the year, multiple theories circulate about the airline's future.
Some industry analysts believe that any deadline extension is only putting off the inevitable after a federal judge blocked the “Hail Mary” of being saved by JetBlue JBLU at the start of the year but, according to a new report by the Wall Street Journal, Frontier Airlines (FRON) is now the airline that is exploring a potential merger.
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“The two budget airlines have had recent discussions about a possible merger, though the people said the talks are at an early stage and that a deal may not come to fruition,” write reporters Alison Sider and Alexander Gladstone. “If a deal between the two carriers is reached, it would likely happen as part of Spirit restructuring its debt and other liabilities in bankruptcy.”
Here is what will happen if Spirit and Frontier merge
While any potential merger is purely hypothetical and would run into the same antitrust concerns and roadblocks as with the JetBlue takeover, the source who talked to the WSJ said that it would be a part of Spirit’s debt restructuring plan under a bankruptcy filing. Neither Spirit nor Frontier representatives have been commenting on anything having to do with such a merger.
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Frontier offered to buy Spirit once before in 2022 for $2.9 billion but was ultimately outbid by JetBlue with an offer of $3.8 billion. While the judge that blocked the latter sale was concerned over a larger airline buying up a smaller one and then raising prices, similar antitrust concerns may or may not arise from a similar deal between two budget carriers.
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What to do with Spirit stock in 2024? This is the latest
Between the news of the debt restructuring at the start of the week and the potential merger later, Spirit stock has been on an upward trajectory unseen since it stabilized at the $1.50 USD level after tanking from the $2.60 range around the bankruptcy report.
In pre-market trading on Oct. 23, Spirit stock jumped by an additional 11%, starting the day at $2.46 USD.
As a result, there are some circulating theories around whether the current boost of market optimism will be enough to get investors to see past the $3.3 billion in total debt Spirit has accrued and come up with a Plan C for the beleaguered low-cost carrier.
"Spirit has to address debt payment timing and resizing the fixed cost structure, and it is still unclear if this can be completed with/without Chapter 11," Raymond James Managing Director and Analyst Savanthi Syth told Reuters after news of the debt refinancing broke.
Spirit shares have fallen by more than 86% since the start of 2024. The refinancing plan reached with creditors gives Spirit an additional $300 million in credit and total $1 billion in freed-up liquidity that will allow it to continue operating until the end of the year and buy it time to work with those interested in helping it chart a turnaround path.
