Why Spirit Airlines Stock Flew Over 100% This Week
Spirit Airlines is finally seeing some favorable winds, with the troubled budget airline’s stock, propelled by merger rumors and a refinancing extension, doubling in value this week.
Spirit Airlines (NYSE: SAVE) stock is staging a remarkable recovery, soaring over 100% this week. This surge follows key developments, including an extension on debt refinancing, an asset sale to shore up liquidity, and renewed speculation about a merger with fellow low-cost carrier Frontier Airlines (NASDAQ: ULCC). These moves offer the financially strapped airline a lifeline amidst a year plagued by setbacks.
Financial Relief from Debt Extension
At the heart of this upswing is Spirit’s successful negotiation for a two-month extension on a critical refinancing deadline. The U.S. Bank National Association, Spirit’s credit card processor, granted the airline until December 23 to address its 2025 bonds. This extension provides Spirit with crucial breathing room. Facing a challenging debt burden and without this extension, Spirit risked the possibility of having its credit card processing services suspended—a potentially devastating scenario for an airline that has already struggled with mounting losses and an 80% drop in stock value over the past year.
Additionally, Spirit tapped into its $300 million credit line and projected it will end 2024 with over $1 billion in liquidity. Despite these improvements, experts suggest that the airline’s long-term stability will require a more robust restructuring strategy.
Cost-Cutting Measures: Job Reductions and Plane Sales
To further ease financial strain, Spirit Airlines has introduced a major cost-cutting initiative, including plans to cut jobs and sell some of its aircraft. In a regulatory filing, Spirit disclosed that it would be selling 23 older Airbus planes to GA Telesis, an aviation services firm, for approximately $519 million. The sale of these Airbus A320ceo and A321ceo jets, expected to be completed by February 2025, is projected to add around $225 million to Spirit’s liquidity through the end of 2025.
These moves align with Spirit’s goal to reduce costs by roughly $80 million annually, a reduction largely anticipated through workforce adjustments. While Spirit did not specify how many employees would be affected, previous reports indicated that pilots have already been furloughed, and additional workforce adjustments are expected as flight volume decreases next year.
Spirit’s sale of aircraft has sparked debate among investors and analysts alike. Although the transaction will generate liquidity, selling off planes will reduce Spirit’s operational capacity in the years ahead. By its estimates, Spirit’s overall capacity for 2025 is projected to decline by mid-teen percentage points. This reduction includes the current sale, as well as prior operational adjustments following delays caused by Pratt & Whitney GTF engine, recalls.
Revival of Merger Talks with Frontier Airlines
Adding further intrigue to Spirit’s potential turnaround, The Wall Street Journal reported this week that Frontier Airlines has reignited merger talks with Spirit. A merger between the two budget airlines had initially been pursued but was derailed when JetBlue Airways (NASDAQ: JBLU) outbid Frontier. However, the JetBlue deal collapsed earlier this year following regulatory blocks over antitrust concerns, putting Frontier back in the picture.
A merger with Frontier could benefit both airlines by combining their resources and strengthening their position against larger U.S. carriers. Currently, Spirit and Frontier face the challenge of competing against the industry’s “big four”—American Airlines (NASDAQ: AAL), United Airlines (NASDAQ: UAL), Delta Air Lines (NYSE: DAL), and Southwest Airlines (NYSE: LUV)—which dominate the market with scale and established customer loyalty programs. A combined Spirit-Frontier airline would create a larger low-cost carrier, providing greater leverage to negotiate with vendors and attract customers who seek affordable, no-frills flying options.
However, while such a merger could offer a lifeline for Spirit, it comes with risks. According to sources cited by The Wall Street Journal, any merger deal would likely involve a restructuring of Spirit’s substantial debt load, potentially in the form of a bankruptcy. This would place Spirit’s shareholders in a precarious position, as equity stakes often lose significant value—or even become worthless—in bankruptcy restructurings.
Cautious Optimism or High-Risk Gamble?
This week’s developments have given Spirit shareholders a reason to feel cautiously optimistic. Spirit’s cost-cutting measures and debt extension provide temporary relief, while a potential merger could bring more permanent benefits. Yet, analysts remain wary. Despite recent stock gains, Spirit’s distressed financial state makes it a risky investment, with some cautioning that it could still end in bankruptcy without further financial stabilization.
For now, Spirit is fighting to remain viable, hoping that strategic asset sales, job cuts, and a potential merger will keep it airborne. Whether these moves will be enough to secure its place in the competitive airline landscape remains uncertain, but recent gains in Spirit’s stock suggest investors are watching closely.
Spirit Airlines (SAVE) Stock Price Action and Chart
Shares of Spirit Airlines (NYSE: SAVE) stock soared 15.05% on Friday, closing the day at $2.79.
This week alone, Spirit Airlines stock rose as much as 124%, reaching a high of $3.30 on Friday. SAVE stock closed the week up 90%.
YTD, SAVE stock is down 82.94%.
View Spirit Airlines Interactive Stock Chart on Barchart
Join the Discussion in the WVC Facebook Investor Group
Have a Stock Tip or New Story Suggestion? Email us at Invest@WealthyVC.com
Disclaimer: Wealthy VC does not hold a position in any of the stocks, ETFs or cryptocurrencies mentioned in this article.
