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Spirit Airlines (NYSE: SAVE) is reportedly preparing to file for bankruptcy protection. The low-cost carrier is in advanced negotiations with its bondholders to establish a bankruptcy plan, which could be filed within the coming weeks. This development follows the breakdown of merger talks with Frontier Airlines (Nasdaq: ULCC), which has significantly impacted Spirit’s restructuring efforts.

The airline has been forced to sharply reduce its growth plans, including furloughing pilots and selling off assets, such as a recent deal in October to sell 23 planes for $519 million.

Mounting Losses at Spirit Airlines and Potential Bankruptcy

The financial struggles of Spirit Airlines are underscored by mounting losses and imminent debt maturities. The airline is confronted with a $1.1 billion bond maturity due within the next year, alongside a critical deadline in late December to refinance bonds associated with its credit card processing.

Spirit’s business model, which relies on offering low-cost tickets with additional paid add-ons, is being challenged by rising operational costs and fierce competition from larger airlines. In response, Spirit has had to cut back on its growth plans significantly, taking drastic measures like selling aircraft to bolster its financial position.

For investors, the potential bankruptcy filing introduces a layer of uncertainty. The unsuccessful merger discussions with Frontier have likely shaken investor confidence, casting doubt on Spirit’s ability to navigate its financial instability and looming debt challenges.

The success of Spirit’s restructuring efforts will largely depend on the support from creditors, which is crucial for shaping investor outlook.

SAVE Stock Plunges in After-Hours Trading

In terms of stock performance, Spirit Airlines’ shares have experienced notable price movements. The stock opened at $3.25 and was trading at $3.22 as of November 13, 2024. The day’s trading saw a low of $3.01 and a high of $3.37, reflecting the volatility surrounding the airline’s financial predicament.

In after-hours trading, the stock price plunged further and is currently (4:42 AM EST) trading at $1.22, down over 62% from its last closing price.

Over the past year, Spirit’s stock has fluctuated significantly, with a 52-week low of $1.40 and a high of $17.02, indicating the market’s reaction to its ongoing challenges.

Key financial metrics highlight Spirit’s precarious position. The airline has a market capitalization of approximately $352.6 million, with a high debt-to-equity ratio of 914.665, underscoring its heavy reliance on borrowed funds.

The company’s financial health is further reflected in its negative trailing and forward earnings per share, and a price-to-book ratio of 0.43554714. Analysts have rated the stock as “underperform,” with a recommendation mean of 3.7.

Target price estimates range from a high of $3.00 to a low of $1.50, with a median target of $2.00, reflecting a cautious outlook on the stock’s future performance.

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