Auto & Transportation

A difficult future awaits Spirit Airlines following the failed JetBlue takeover.

By - 18 Jan 2024 02:33 AM

After a federal judge this week blocked JetBlue Airways' proposed $3.8 billion takeover of Spirit Airlines, the budget carrier is now in precarious financial position.

The business community speculate that the airline may have to further reduce its already low fares. According to some Wall Street analysts, the discount carrier might need to reorganize, if not go bankrupt.

Following the release of the decision on Tuesday, Spirit's stock dropped 47%. On Wednesday, they saw yet another 23% decline, reaching a new all-time low of $5.74 per share.

Even before the decision, Spirit, whose last profitable year was 2019, was dealing with difficulties: it is managing the grounding of some Airbus narrow-body aircraft due to Pratt & Whitney engine problems; additionally, it is dealing with lower-than-expected demand in the wake of the pandemic, in addition to increased expenses.The airline may try to find a new buyer, but Helane Becker, an airline analyst at TD Cowen, stated in a note that "a more likely scenario is a Chapter 11 filing, followed by a liquidation." "We understand that this may sound severe and alarming, but the truth is that we think there are very few circumstances in which Spirit can reorganize."

The airline, which is well-known for its inexpensive tickets and extra charges for things like baggage claim and seat preference, may have to further reduce prices if it files for bankruptcy.

In an effort to get as much money as possible through the carrier, Becker predicted that major Spirit routes may see some shocking prices.