spirit airlines (New York Stock Exchange: Save) The company is reportedly scrambling to figure out how to deal with its debts, the latest sign of problems the company will face if the merger fails. jet blue airlines (NASDAQ:JBLU). As of 1:30 p.m. ET Thursday, Spirit shares were down 28% as investors scrambled for an exit.
Spirit is getting serious about debt
Spirit Airlines is currently flying through severe turbulence. Just two years ago, the airline was the target of competing offers from JetBlue Airways and airlines. Frontier Group Holdings As a result, Spirit was valued at nearly $4 billion.
JetBlue won the bidding war, but suitors' hopes of acquiring Spirit were dashed earlier this week when a federal judge sided with antitrust regulators seeking to block the merger as a threat to competition. It was. The airlines may appeal the ruling, but with time running out for a deal and the situation in the airline industry becoming more perilous since the deal was announced, there is little momentum left for the merger to take place. It looks like it hasn't.
As noted when the ruling was announced, the ruling leaves Spirit with the unenviable burden of having to fend for itself through a potential downturn as debt piles up and some planes are grounded due to engine problems. I was put in a position. The company has about $1.1 billion in debt due in 2025, and rising interest rates will make it difficult to refinance.
A report Thursday said Spirit plans to discuss its options with advisers. wall street journal report. Investors fear the talks could lead to a bankruptcy filing, which would resolve debt but wipe out equity holders and send the stock price to new lows.
Is Spirit Airlines a buy after its stock price plummets?
Spirit stock has lost more than 70% of its value since the judge's ruling and is down 90% in the past three years.
The company's problems come at a unique time for the airline industry. Typically, airlines go into financial trouble in the midst of a recession when there is little demand for new aircraft. This could allow for an orderly restructuring, since there are few options if creditors decide to seize the aircraft.
but, boeing and airbus It is struggling to keep up with demand, and demand for planes remains high even as questions about the economy surface and demand for air travel appears to be cooling. Spirit is expected to have little leverage in negotiations with creditors, as the seized aircraft are likely to be easily transferred to other airlines.
It's too early to say anything definitive about Spirit's future. However, the risks are significant enough for investors to turn away. Unless Spirit can revive the merger agreement or find another way to raise money, it's hard to be optimistic about what the future holds for the airline.
Should you invest $1,000 in Spirit Airlines right now?
Before buying Spirit Airlines stock, consider the following:
of Motley Fool Stock Advisor Our analyst team has identified what they believe Best 10 stocks Investors can buy now…and Spirit Airlines wasn't among them. These 10 stocks have the potential to generate impressive returns over the next few years.
stock advisor provides investors with an easy-to-understand blueprint for success, including guidance on portfolio construction, regular updates from analysts, and two new stocks each month.of stock advisor Since 2002, the service has more than tripled S&P 500 returns*.
See 10 stocks
*Stock Advisor will return as of January 16, 2024
Lou Whiteman has no position in any stocks mentioned. The Motley Fool has no position in any stocks mentioned. The Motley Fool has a disclosure policy.
Why Spirit Airlines stock is plummeting again today The original article was published by The Motley Fool