Spirit Airlines Faces Setback as Acquisition by JetBlue Airways is Blocked

Spirit Airlines shares continued their descent after a federal judge this week blocked its acquisition by JetBlue Airways for $3.8 billion.

The Wall Street Journal reported Thursday that Spirit is exploring its strategic options following the legal setback, including ways of dealing with a $1.1 billion debt pile coming due in 2025.

Spirit didn't respond to a request for comment.

Judge Rules in Favor of Antitrust Enforcers

U.S. District Judge William Young on Tuesday ruled in favor of federal antitrust enforcers who had sued to stop the deal on grounds that it would hurt airline industry competition and raise prices for budget-conscious travelers.

JetBlue and Spirit contend a merger would allow the enlarged carrier to offer low-cost fares in more markets around the country and help it compete with the largest U.S. airlines. The companies said they they are assessing their legal options.

Spirit Airlines Stock Price Takes a Hit

Spirit's stock price fell 19% in early afternoon Thursday to roughly $5 before rebounding slightly to $5.72. The shares have plunged roughly 68% since Young blocked the deal.

Spirit Airlines Faces Financial Challenges

Spirit Airlines, based in Miramar, Florida, experienced a significant decline in revenues in 2020 due to the COVID-19 pandemic's impact on air traffic. The airline has continued to struggle in the following year. While the company's top-line results have improved as travelers returned to the skies, its financial losses have grown.

In the most recent quarter, Spirit Airlines reported a net loss of $157.6 million, extending a series of losses dating back to 2020. This downturn occurs as larger carriers like American Airlines, Delta, and United increasingly compete with discount players in key markets.

Concerns about Spirit Airlines' long-term prospects have emerged due to its downbeat financial results. Some Wall Street analysts speculate that the airline may be heading towards bankruptcy. Helane Becker, a veteran airline analyst with financial services firm Cowen, stated in a report that while Spirit could explore a potential deal with another buyer, a more likely scenario is a Chapter 11 filing followed by liquidation. Becker believes there are limited scenarios that would enable Spirit Airlines to successfully restructure.