Major US airline warns it will shut without cash boost... sparking fears of mass route cancellations
The budget carrier says Americans booking fewer flights than expected and a lack of cash in the bank are putting intense pressure on its business.
The warning, delivered during Spirit's quarterly earnings report on Monday, raised concerns about possible flight cancellations during the summer vacation season and upcoming holidays.
Bosses said tough market conditions — including too many flights and weak leisure travel demand in the April to June quarter — have led to it being forced to lower fares. They expect these challenges to continue for the rest of the year.
'Management has concluded there is substantial doubt as to Spirit's ability to continue as a going concern within 12 months from the date these financial statements are issued,' the carrier said in the filing. It needs more cash to carry on beyond that.
Last month, Spirit furloughed 270 pilots and demoted another 140 as part of efforts to save money.
Based in Florida and known for its bright yellow planes, Spirit filed for bankruptcy protection last November after years of losses, failed merger talks, and heavy debt.
It was the first major US airline to seek Chapter 11 since 2011. The airline emerged from bankruptcy in March after creditors approved its restructuring plan and wiped out all existing shares, hitting ordinary investors.
Ownership was handed to Spirit's lenders, which include investment funds managed by firms such as Citadel Advisors.
Ongoing uncertainty tied to President Donald Trump's tariffs and budget cuts has caused travelers to tighten their budgets and rethink plans.
Spirit also revealed that its credit card processor has demanded more funds be set aside as collateral, or the company risks losing its contract — which expires at the end of the year.
To boost cash reserves, Spirit plans to sell or lease aircraft and real estate, and reduce excess airport gate capacity.
The airline said doubts remain about its ability to meet financial requirements and continue operating over the next year, citing ongoing talks with stakeholders.
Spirit recently rejected a proposed takeover by fellow budget airline Frontier, saying the proposed buyout offered less value for Spirit's creditors than the bankruptcy restructuring.
Spirit has been struggling with losses and declining revenue since the pandemic. In fact, while it may have made profits some quarters, it has not turned an annual profit since even before the pandemic.
Then as travelers began to once again take to the skies, many turned to larger airlines, leaving Spirit and other budget airlines struggling to get a foothold in the market.
Spirit executives saw the merger with JetBlue as a way to claw back a market share, but the Department of Justice argued that such a deal would violate anti-trust laws
Frontier Airlines and Spirit Airlines first planned to merge in 2022, then but JetBlue Airways swooped in with a higher bid. That won over Spirit's shareholders.
Spirit executives saw the merger with JetBlue as a way to claw back a market share, but the Department of Justice argued that such a deal would violate anti-trust laws, and a judge agreed.
As a result, JetBlue pulled out of a merger agreement.
Spirit was in talks with Frontier again in October as it hoped to revive merger discussions.
Frontier´s latest offer would have allowed Spirit Airlines to retain 19 percent of the company's equity.
But Spirit said the offer carried additional financial costs, including costs associated with a longer stay in bankruptcy, and more risks, including the risk that U.S. regulators would reject the merger of the two airlines.
Meanwhile, in December Silver Airways also filed for Chapter 11. The airline flies to vacation hotspots across Florida and the Caribbean - prompting fears for the fate of trips planned by Americans looking for winter sun.
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