Spirit Airlines (SAVE) shares are tumbling 40% in premarket trading Friday as the carrier reportedly is exploring a bankruptcy filing in the wake of its failed $3.8 billion merger with rival JetBlue Airways (JBLU).

According toThe Wall Street Journal, the budget airline has been in talks with its bondholders over the terms of a chapter 11 filing. It also has been looking into restructuring its balance sheet as it grapples with billions of dollars of debt, the report said.

Spirit in August posted a $192.9 million second-quarter loss, far larger than the $2.3 million loss in the prior-year period, and has been furloughing hundreds of pilots. 

Spirit Reportedly Has $3.3B Debt Load

According to the report, of the airline's $3.3 billion debt load, $1.1 billion of secured bonds are coming due in under a year.

A successful merger with JetBlue would have created the fifth-largest carrier in the U.S. and put it in a position to compete in a domestic airline industry dominated by four big players: American Airlines (AAL), Delta Air Lines (DAL), Southwest Airlines (LUV), and United Airlines (UAL).

The large carriers have been able to undercut their budget rivals like Spirit and Frontier Airlines with much cheaper fares since the pandemic. Shares of Frontier's parent Frontier Group Holdings (ULCC) are up nearly 6% in premarket trading, while those of JetBlue are up 5%.