Spirit Airlines’ long descent interrupted by bond-market lifeline
The budget carrier received a last-minute reprieve from a key creditor, delaying — at least momentarily — what seems like a one-way trip toward bankruptcy.
Shares of Spirit Airlines soared as much as 73% in trading on Monday morning after the troubled bare-bones air carrier received a last-minute two-month extension pushing back a deadline to refinance some $1 billion in bonds.
Remarkably, the giant one-day move, by far its largest daily gain in 13 years as a public company, does little to shift the long-term story on the stock, which remains down about 85% this year.
It’s no wonder. The company has posted just a single profitable quarter in the last 4.5 years, despite a robust recovery in air travel since the pandemic.
The problem for Spirit, which has also seen a recovery in bookings since the pandemic, is that its levels of debt have ballooned from roughly $3 billion (in long-term debt) in late 2019 to more than $7 billion last quarter.
That increase, of course, came as interest rates spiked during the inflationary aftermath of the Covid crisis, resulting in a steady deterioration of the company’s financial position. In recent weeks, there’s been open discussion among analysts and credit ratings firms that a reorganization via Chapter 11 bankruptcy is a likely outcome.
