Spirit Airlines prepares to file for bankruptcy after talks with Frontier Airlines collapse: report

Spirit Airlines is preparing to file for bankruptcy after merger talks with Frontier Airlines broke down. The Wall Street Journal writesciting people familiar with the matter.

The company’s shares fell 39% to $1.8 after hours. The stock is down nearly 80% this year, while the S&P 500 index of passenger airlines is up 52%.

The ultra-low-cost carrier is in advanced discussions with bondholders to craft a bankruptcy plan that would have the support of a majority of creditors, the report said.

Spirit is preparing to file for bankruptcy within weeks, the report added.

Last month, the WSJ said in a separate report that Frontier Airlines was exploring a bid for Spirit. However, Frontier decided not to move forward with such a merger at this time, Tuesday’s WSJ report clarified.

The company did not immediately respond to a Reuters request for comment.

The Dania Beach, Fla.-based airline has been losing money despite strong travel demand. It has failed to report a profit in the past five out of six quarters, raising doubts about its ability to deal with looming debt defaults.

Spirit said in October that it would lay off about 330 pilots on Jan. 31 as part of its efforts to cut costs and strengthen its finances.

The company is also selling 23 older Airbus aircraft for $519 million. The sale proceeds are estimated to provide $225 million in cash flow next year.