The ultra low-cost carrier Spirit Airlines has been struggling to return to sustainable profitability amid rising operating costs and persistent supply-chain problems. That has raised concerns about the company’s ability to repay its debt that is due to mature next year.

This month Spirit Airlines completed a series of sale and leaseback transactions covering dozens of planes in a bid to repay about $465 million of debt on those jets.

Spirit Airlines possible bankruptcy

With a recovery in earnings not in sight, some analysts said the company might consider a bankruptcy filing to clean up its balance sheet and reorganize into a financially stronger airline.

Helane Becker, airline analyst at TD Cowen, said Spirit is likely to look for another buyer, but that a more likely scenario is a Chapter 11 filing, followed by a liquidation. She said the recent capital raise has given the company funds to self-finance a potential Chapter 11 filing.

“We recognize this sounds alarmist and harsh,” Becker said. “But the reality is we believe there are limited scenarios that enable Spirit to restructure.”

Spirit Airlines ground planes

The airline is expected to burn cash over the next several years. This will have to continue to raise capital to survive, said Conor Cunningham, an analyst at Melius Research.

“The path forward for Spirit turns to survivability,” Cunningham said.

The airline has been among the carriers hardest hit by a snag with RTX’s Pratt & Whitney Geared Turbofan (GTF) engines. It is the largest operator of GTF-powered aircraft in the United States.

As a result, it had to ground a number of planes last year. The number of Spirit Airlines grounded planes is estimated to climb steadily in 2024, from 13 in January to 41 in December.

Spirit Airlines stock downgraded

Excess industry capacity in its key markets is hurting its pricing power, forcing the company to indulge in promotional activity with steep discounting to fill up its planes.

After Spirit Airlines Q3 earnings last October, Florida-based company said it was evaluating its growth profile as it faced softer demand.

Analysts at Seaport Research Partners downgraded the Spirit Airlines stock after the court’s ruling. They said due to “the lack of a credible path to profitability.”

JetBlue Spirit deal

Spirit Airlines’ woes had led to a sell-off in its stock, raising worries about the impact on JetBlue’s balance sheet after the merger. Spirit Airlines shares losing nearly half of their value since JetBlue won its takeover battle. Some analysts wondered if that would prompt renegotiate the terms of acquisition deal.

Stock update

Spirit Airlines shares plunged 47% on Tuesday after the court’s ruling, while JetBlue’s shares gained about 5%.

Frontier Airlines bid

Analysts also raised the possibility that rival Frontier Airlines, which had lost out in a fierce bidding war, could again make a bid.

Bill Franke, whose airline-focused private equity firm Indigo Partners owns 82% of Frontier. He had not ruled out making a fresh bid for Spirit if the transaction with JetBlue failed to close. Frontier declined to comment.

“Spirit has to figure out its Plan C,” said Henry Harteveldt, founder of travel consultancy Atmosphere Research Group. “Plan A was to merge with Frontier, Plan B became a merger with JetBlue.”

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JetBlue CEO Robin Hayes will step down next month, the company said Monday. The airline’s chief operating officer, Joanna Geraghty, will take the helm. Hayes, 57, is a former British Airways executive who joined JetBlue in 2008 and became CEO in 2015. He pushed the airline to start transatlantic flights and create a partnership in the Northeast with American Airlines.

Spirit airline acquisition

The departure of CEO Robin Hayes comes as JetBlue tries to acquire budget carrier Spirit Airlines.

The Spirit acquisition will be nearly $4 billion combination that the New York-based carrier JetBlue argues will help it grow and better compete against larger rivals such as Delta and United.

The U.S. Department of Justice sued to block the merger last year. A decision by a federal judge in Boston is expected in the coming weeks after a trial that wrapped up late last year.

JetBlue CEO Robin Hayes steps down

JetBlue CEO Robin Hayes, a more than three-decade airline industry veteran, cited the high-pressure nature of the job in announcing his resignation via a company statement.

“It’s bittersweet to retire from this airline I love, but I will always feel a part of the JetBlue team and be rooting for its continued success,” Hayes said. “However, the extraordinary challenges and pressure of this job have taken their toll, and on the advice of my doctor and after talking to my wife, it’s time I put more focus on my health and well-being.”

Hayes will remain on the board of directors of JetBlue until he leaves his post on February 12, at which point he will stay on as a strategic advisor and Joanna Geraghty will join the board.

Joanna Geraghty as CEO

Joanna Geraghty has spent about two decades at JetBlue, the majority of the relatively young carrier’s lifespan. During that time, the airline expanded internationally and launched a business class.

Geraghty, 51, joined JetBlue in 2005 and has taken on an increasingly prominent role at the New York-based airline in recent years, including becoming president and chief operating officer in 2018.

Geraghty said she was honored to get the new job, and said she was looking forward “as we execute on our strategic initiatives, return to profitable growth, and generate sustainable value” for shareholders.

JetBlue, whose flights are concentrated in the heavily congested New York-area airspace and other busy patches of the country such as Florida, has struggled in recent months.

Geraghty’s task etched

Geraghty will be tasked with righting the ship and, if the DOJ is unsuccessful in blocking Spirit airline acquisition, overseeing that merger process. JetBlue plans to convert Spirit’s bright yellow and densely packed planes into its own cushier configurations.

Geraghty was named COO in 2018 and headed parts of the business, including its growing network and its revenue management.

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