A sharp selloff in Spirit Airlines shares picked up speed on Thursday after a report said the low-cost carrier was looking into ways to deal with its financial challenges.
Spirit shares fell 31% to a record low of $4.04 and have been sinking since Tuesday on investor concerns about its financial future after a US judge blocked its $3.8 billion merger with JetBlue Airways.
The Wall Street Journal reported the airline plans to discuss with advisers on a path forward as it faces near-term debt maturities.
Reuters couldn’t independently verify the WSJ report, which did not provide any details on the discussions. Spirit did not immediately respond to a request for comments on the report.
Earlier on Thursday, the company said it has been taking and will continue to take prudent steps to ensure the strength of its balance sheet and ongoing operations.
The comments came a day after rating agency Fitch said Spirit’s credit profile was under pressure as it faced significant refinancing risk in the next year with its $1.1 billion loyalty program debt coming due in September 2025.
Since the court’s ruling on Tuesday, a number of analysts have downgraded Spirit’s stock and its shares have shed more than half of their value.
“Although JetBlue and Spirit can still appeal Tuesday’s court ruling, it is unclear why JetBlue wouldn’t cut its losses here and recognize that it avoided a risky bid on a highly levered carrier with steep losses,” Citi analyst Stephen Trent wrote in a note.
JetBlue shares were up about 2.3% in midday trade.
Spirit has been among the carriers hardest hit by a snag with RTX’s Pratt & Whitney Geared Turbofan (GTF) engines. It is the largest operator of GTF-powered aircraft in the United States.
Meanwhile, excess industry capacity in its key markets is hurting its pricing power, forcing the company to indulge in promotional activity with steep discounting to fill up its planes.
Some analysts have said that the company might contemplate a bankruptcy filing to streamline its balance sheet and reorganize into a financially robust airline.
Spirit, however, said it is “confident” in its strengths and strategy and remains committed to delivering affordable fares.
The company entered into sale-leaseback transactions this month for 25 aircraft, which provided it about $419 million in cash.
The company said it is changing its aircraft delivery schedule through the end of the decade and slowing capacity growth in the near term.
The carrier also has plans to cut $100 million in structural costs.
Spirit’s ratio of enterprise value to sales for the next 12 months is 1.3, compared with 0.6 for JetBlue, according to LSEG data. A low ratio implies a more attractive investment opportunity.