Spirit Airlines slump pushes airline stocks up 🛬

Spirit Airlines (SAVE.US) lost more than 25% today after reports of the company's potential inability to pay its debt. Thus, the company's stock price fell to new all time  lows. 

The company's stock price has fallen nearly 90% this year. Source: xStation

Spirit Airlines' problems began as early as January 2024, when the company, weakened by increased competition in the air travel market, weakening demand and a persistently high cost of capital, attempted to merge with JetBlue Airways (JBLU.US). However, this attempt was rejected by a federal judge, which saw it as too strong a risk to market competitiveness. As a result, Spirit Airlines' stock price plunged and the company has since lost nearly 90% of its capitalization. 

Investors' concerns have grown further with reports in the Wall Street Journal regarding the start of talks with lenders regarding the use of the so-called Chapter 11 procedure, related to court-supervised financial restructuring. Spirit Airlines is considering such a move in view of holding $3.3 billion in debt, a third of which is due in less than a year. At the same time, October 21 is the deadline for rolling over the debt or extending the maturity date, as stipulated by the company's agreement with US Bank, which operates the company's credit card.

Spirit Airlines, since the pandemic, only managed to achieve a positive net income in 3Q21. The company's revenue has remained at a similar level in recent quarters. Source: Bloomberg Finance L.P., XTB Research

Faced with the risk of default and the likely failure to refinance its debt, the company's stock price fell more than 25% today, while contributing to the rise of its competitors. JetBlue Airways is gaining more than 16% today, American Airlines is up 5% and Ryanair grows 1,7%.