By Callum Keown

Spirit Airlines stock tumbled in premarket trading Wednesday following a report that said the ultra-low-cost carrier was preparing to file for bankruptcy protection.

The filing could come within weeks, The Wall Street Journal reported, adding that merger talks with rival Frontier Airlines have broken down. Spirit Airlines is in discussions with bondholders over a bankruptcy plan that would have support from a majority of creditors, the Journal added, citing people familiar with the matter.

Spirit stock fell 61% to $1.26 in premarket trading. In a filing late Tuesday, Spirit said it was in "constructive discussions" with its creditors and also was exploring strategic alternatives and other ways to improve liquidity. An agreement with creditors could lead to the cancellation of its equity shares, Spirit added.

The company also said it was unable to report third-quarter earnings given the restructuring talks.

The airline has reported a loss for four consecutive quarters and analysts see that continuing for at least the next six quarters, according to FactSet data.

Coming into Wednesday, the stock already has declined 80% this year. The real trouble began in January when a U.S. federal judge blocked the airline's proposed merger with JetBlue Airways following a Justice Department lawsuit. Judge William Young ruled it would reduce competition and harm cost-conscious travelers who rely on Spirit's low fares.

"Spirit is a small airline. But there are those who love it," the judge wrote in his decision. "To those dedicated customers of Spirit, this one's for you."

I wonder how the dedicated customers of Spirit feel now? Or shareholders, for that matter.

Spirit's efforts to find a buyer appear to be cursed. It managed to strike a deal with JetBlue but under a Biden administration eager to take a tough stance on competition concerns. Now, ahead of a Trump presidency that may ease regulation, its talks with Frontier seem to have collapsed.

Spirit and Frontier didn't respond to requests for comment from Barron's early Wednesday.

Write to Callum Keown at callum.keown@dowjones.com

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November 13, 2024 06:09 ET (11:09 GMT)

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