### Spirit Airlines Edges Closer to Bankruptcy as Merger Talks Fail

In a troubling development for Spirit Airlines (NYSE:SAVE), the company's shares plummeted on Wednesday after reports surfaced that a potential merger with Frontier Airlines has fallen through, making bankruptcy increasingly likely for the Florida-based budget carrier. According to the Wall Street Journal, Spirit is in advanced talks with its creditors to devise a bankruptcy plan, with an official filing expected within the upcoming weeks.

The airline further complicated matters by filing a Form 12b-25 with the Securities and Exchange Commission (SEC) late Tuesday, indicating a delay in submitting its 10-Q report on time. Spirit's management disclosed that if they reach an agreement with creditors, they would move forward with a statutory restructuring, which would ultimately nullify its existing equity. However, the proposed restructuring assures that secured aircraft creditors, general unsecured creditors, employees, customers, vendors, suppliers, and lessors will not be affected.

In its latest forecast for the third quarter, Spirit Airlines projected a 4.8% decline in revenue compared to the previous year. The management also predicted an adjusted operating margin of approximately -26%. The unsettling news led Cowen analyst Tom Fitzgerald to revise his estimates for fiscal years 2025 and 2026, based on the expectation that Spirit will significantly downsize amid restructuring. Fitzgerald warned that this situation could prompt customers to book flights with other airlines, further straining Spirit's liquidity.

Should the restructuring proceed, the focus will shift to Spirit's fleet management. "We expect the airline to liquidate the remaining encumbered assets to settle associated debt on the aircraft and work towards rejecting leases on the rest of the fleet," Fitzgerald remarked. Presently, Spirit's fleet includes 190 aircraft, with data from Cirium showing that 28 of these are owned and encumbered while the remaining 162 are leased. Notably, the airline is also in the process of selling 23 aircraft to GA Telesis.

Disclaimer: The opinions expressed in this article are solely those of the featured analyst and are intended for informational purposes only. It is crucial to perform your own analysis before making any investment decisions.