Spirit Airlines stock craters on warning it could go out of business
'The Company has continued to be affected by adverse market conditions, including elevated domestic capacity and continued weak demand for domestic leisure travel in the second quarter of 2025, resulting in a challenging pricing environment,' Spirit said in its second quarter financial disclosure. 'As a result, the Company continues to experience challenges and uncertainties in its business operations and expects these trends to continue for at least the remainder of 2025.'
Though the company was trying to alleviate its financial situation with initiatives such as pilot furloughs, selling spare engines, and potential sales of aircraft, real estate, and excess airport gate capacity, the 'uncertainty of successfully completing the initiatives" meant that management felt there was 'substantial doubt as to the Company's ability to continue as a going concern' over the next 12 months.
Spirit Aviation shares cratered over 40% in midday trade.
Spirit's bumpy ride
Spirit Aviation Holdings emerged from the financial restructuring of Spirit Airlines on March 12, and has faced a difficult time ever since.
The bankruptcy was brought on following a failed takeover by JetBlue Airlines, with both airlines citing regulatory issues standing in the way of the merger both desired. This followed Spirit rejected overtures from budget operator Frontier earlier in the year, after Frontier rejected Spirit's counteroffer.
Spirit's reorganization resulted in taking on $795 million in debt and brought in $350 million in new equity and set up a $275 million credit line.
It is the minimum liquidity requirements of Spirit's debt obligations, and collateral required by Spirit's credit card processing agreements that have Spirit in bind, because those agreements require Spirit's operations to improve faster than the company anticipated.
New CEO Dave Davis has been implementing the current strategy of appealing to higher-spending travelers with a premium economy program, updating Spirit's frequent flyer program, and announcing new partnerships with other airlines and travel businesses to boost demand.
But the company ended up booking only $1.02 billion in revenue in the just completed quarter, resulting in a net income loss of $245.83 million, and loss per share of $7.24.
Excess capacity, especially with budget conscious consumers, has been an industry problem for some time now.
Delta (DAL) CEO Ed Bastian told Yahoo Finance last month that the industry is going to reward airlines like that have invested in premium services, particularly those that can deliver that experience at the right price.
'That's been a big change in the industry that is 100 years old,' Bastian said about the growing trend of premium services. 'The carriers that have invested heavily in reliability, products, service offerings are the ones that are able to price for it, and [they] give consumers the value and experience they want.'
Pras Subramanian is the lead transportation reporter for Yahoo Finance. You can follow him on X and on Instagram.
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