Spirit Airlines (SAVEQ) has warned that it may not be able to keep operating over the next 12 months. The low-cost carrier shared the update in a filing with the Securities and Exchange Commission, saying its cash position is under strain despite exiting bankruptcy in March. At the time, the company had reduced debt by about $795 million and aimed for a $252 million profit in 2025. However, results have shifted.
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Multiple Challenges Ahead
In the second quarter, Spirit Airlines reported a net loss of $245.8 million, a more profound loss than the $192.9 million recorded a year ago. Since emerging from bankruptcy, the airline has been using its cash faster than expected, creating concern over whether it can meet financial requirements tied to its debt.
Moreover, Spirit Airlines faces new challenges with its credit card processing partner. The processor has asked for more collateral and might not renew its agreement when it expires on December 31. If that happens, it could lock away more of Spirit’s available cash. Analysts have noted that falling below required cash levels could trigger default clauses in its debt agreements, which could make it harder for the company to keep operating.
In addition, industry conditions have become more difficult. Domestic leisure travel demand has stayed soft this year, while airline capacity remains high. The company said tariffs announced in February contributed to weaker demand. Spirit Airlines has tried to improve revenue by adding fare bundles and introducing a “Go Comfy” option with blocked middle seats. Yet these efforts have not made up for higher costs, including labor. The carrier also does not have the type of loyalty program that brings extra income for larger rivals.
Cost Cuts and Missed Deals Leave Outlook Uncertain
To help raise funds, Spirit Airlines has been selling aircraft through sale-leaseback transactions. It is also considering selling real estate and airport gate rights. Lastly, the company has announced plans to furlough 270 pilots as part of cost cuts. However, these measures may not be enough to fix the underlying cash flow problem.
Earlier this year, Spirit Airlines turned down a $2.1 billion offer from Frontier Airlines. That decision followed the government’s block of JetBlue’s (JBLU) planned $3.8 billion acquisition in 2024. Without a merger partner or a significant cash injection, the company’s financial position will likely remain under heavy pressure.
Unfortunately, currently there are no analyst ratings for SAVEQ stock or technical analysis.