Sources told Reuters on Thursday that Spirit Airlines is considering refinancing its debt and not restructuring.
The company's stock price has fallen since Tuesday on investor concerns about the company's financial future after a U.S. judge blocked its $3.8 billion merger with JetBlue Airways.
The decline in the company's stock accelerated Thursday afternoon. The Wall Street Journal reported The ultra-low-cost airline is said to be considering restructuring options. The details of the discussion were not disclosed in the report.
But after Reuters reported the company's comments, Spirit shares pared losses, falling 7% in afternoon trading.
“Spirit continues to take steps to strengthen its balance sheet,” said the person, who requested anonymity because the discussions are still private. “What we are looking at is refinancing the debt.”
Ratings agency Fitch said Wednesday that Spirit faces significant refinancing risks next year as its $1.1 billion loyalty program debt matures in September 2025, putting its credit profile under pressure. .
The company said early Thursday that it has and will continue to take prudent steps to ensure the strength of its balance sheet and continued business.
Since Tuesday's court ruling, many analysts have downgraded Spirit stock, and the value of the company's stock has fallen by more than half.
“JetBlue and Spirit can appeal Tuesday's court ruling, but why hasn't JetBlue cut its losses here and is a highly leveraged airline with significant losses,” Citi analyst Stephen Trent said. It is unclear whether he will realize that he has avoided making a risky bid for the company,” he wrote in a note. .
JetBlue shares rose about 7%.
Spirit was one of the carriers hardest hit by RTX's Pratt & Whitney Geared Turbofan (GTF) engine failure. The company is the largest operator of GTF-equipped aircraft in the United States.
Meanwhile, the industry's overcapacity in key markets is negatively impacting the company's pricing power, forcing the company to indulge in promotional activities with deep discounts to fill its aircraft.
Some analysts have said the airline may consider filing for bankruptcy to streamline its balance sheet and restructure itself into a financially healthy airline.
But Spirit said it remains “confident” in its strengths and strategy and remains committed to offering affordable fares.
This month, the company closed sale-leaseback deals for 25 aircraft, netting it approximately $419 million in cash.
The company said it would change its aircraft delivery schedule through the end of 2010 and slow capacity growth in the short term.
The company also plans to reduce structural costs by $100 million.
Spirit's enterprise value to sales ratio for the next 12 months is 1.3, compared to JetBlue's 0.6, according to LSEG data. A lower ratio means more attractive investment opportunities.
