Spirit Airlines said in a regulatory report on Friday that it is looking into ways to deal with its large amount of debt. One option is to refinance $1.1 billion in bonds and loans that are due in September 2025.
Since the airline has had a rough few years, it wants to refinance its debt to better control its cash flow and lower the risk of going bankrupt.
Spirit had a total debt of about $1.3 billion as of December 31, 2023. Most of this debt was related to its reward program, Free Spirit. This is the biggest single part of its debt obligations: the $1.1 billion payment due in 2025.
Investors are worried that Spirit won’t be able to pay back or refinance this debt as its losses keep growing and its stock price falls. The company wants to restore its reputation and remove doubts about its future by taking action now.
The filing from Spirit said that the company is looking at “various options” to refinance the 2025 deadlines. This might mean getting new bonds, loans, or equity funds to pay off the debt.
The goal is to lower Spirit’s big risk of not being able to refinance in 2025 and give the company more time to carry out its business plans.
Spirit has had a harder time than some of its competitors because budget-conscious leisure tourists are cutting back on spending because of high inflation and economic uncertainty.
In the third quarter of 2023, Spirit Airlines had a net loss of $157.6 million. On October 26, 2023, the company reported its Q3 2023 financial data. It had a net loss of $157.6 million, or $1.44 per diluted share.
Even if it costs more in interest, refinancing the debt could ease Spirit’s cash flow problems in the short term and keep the company from having to make tough financial choices in the future.
The plans for refinancing come after Spirit’s $3.8 billion plan to join with another low-cost carrier, Frontier Group Holdings, fell through last year.
After at first agreeing to Frontier’s takeover offer, Spirit later changed its mind because of concerns from regulators and accepted a lower offer from JetBlue Airways. But later, JetBlue also left, making it unclear what Spirit will do next as an independent airline.
The failed merger attempt made things even worse for Spirit. Before the pandemic, its low-cost model helped it grow quickly. But Covid’s destruction of travel demand and current economic problems have hit budget carriers especially hard.
Spirit is only worth a small part of what it was worth in 2021, when its stock was worth about $40. As thoughts of bankruptcy grow, the airline may be able to get through today’s tough conditions by refinancing and resizing its debt.
When asked about its plans to refinance its debt that comes due in 2025, Spirit said it is still looking at all of its choices and has not yet made a decision. Taking action now, on the other hand, shows that you want to help the airline’s finances in the long term.
In the coming months, it will be clear if Spirit can finally get good terms to refinance its big debts and start making things smooth again after a very rough ride lately.