By Pratyush Thakur
(Reuters) -Spirit Airlines shares slumped 40% before the bell on Friday after the Wall Street Journal reported that the ultra-low-cost carrier was in talks with its bondholders about a potential bankruptcy filing.
The stock has lost more than 85% of its value this year as the carrier struggled with the fallout of a failed $3.8-billion-merger with JetBlue Airways (NASDAQ:).
Spirit’s long-term debt and finance leases amounted to approximately $3.06 billion, excluding current maturities, as of Dec. 31.
“We suspect Spirit should be able to renegotiate with creditors outside of bankruptcy,” Raymond James analyst Savanthi Syth said but raised concerns on whether the airline can reduce its fixed costs without entering Chapter 11 protection.
The timing of such a filing, should it happen, would not be imminent, according to the report.
The airline, which has struggled to report profit in recent quarters, also had to ground several Airbus planes due to problems with the Pratt & Whitney geared turbofan engines.
The company has flagged a steeper loss in the third quarter due to what it called an “intense competitive battle” for price-sensitive leisure travelers and an oversupply of airline seats in the domestic market.
Spirit CEO Ted Christie had in June shrugged off concerns of a potential Chapter 11 bankruptcy and said he was “encouraged” by the plan it had in place after its JetBlue merger fell through.
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