The long-term future of Spirit Airlines remains unclear as analysts warn that the company could struggle to turn around its poor financial position without support.
What’s Happening At Spirit
One of the most significant underlying issues that Spirit Airlines has yet to be able to rectify is its financial position. The company is continuously making losses, and since the pandemic, despite a strong resurgence in demand across America, it has struggled to adequately perform with its business model.
While a strong word for a company, bankruptcy has been floated around several times by analysts and many more who study the carrier in-depth. Even if some deem such a word too strong, the future outlook for Spirit under its current status isn’t bright.
Spirit turned a profit before the pandemic, but since then, it has lost over a billion USD, which is concerning for the company.
Refinancing debt is a huge focus point for the company as it looks to move more positively into the future, per Reuters. However, restructuring is not something that has been considered at this point.
The Planned JetBlue Merger
JetBlue had initially proposed a purchase of Spirit Airlines worth some USD 3.8 billion, believing a deal would be mutually beneficial.
Additionally, such a merger, if approved, would’ve allowed JetBlue to close the gap between it and some of the leading airlines in the United States.
However, following the court ruling, a merger has been blocked as the court believes that such a merger would reduce competition and have a major impact on consumers.
Spirit Airlines is a low-cost carrier at heart and, as a result, provides cheap fares for customers around America. However, the belief is that if JetBlue acquired the company, these low fares would go missing and thus remove consumers’ ability to travel into key markets.
The Justice Department said that people love Spirit, even though it’s a small airline, and if JetBlue acquired it, there wouldn’t be an airline to love.
However, some analysts on Wall Street believe that Spirit is a sinking ship and a merger is the only way out of it. As a result of the deal being blocked, this could spiral into an uncontrollable position.
Spirit Airlines was reportedly keen to get JetBlue to appeal the ruling preventing the takeover worth billions. However, onlookers and industry analysts say that such a deal would be better for JetBlue to walk away from.
The pair are now moving ahead with a formal appeal. Mergers being blocked isn’t abnormal, nor are legal appeals being launched. However, turning around such a decision presents various challenges for all relevant parties.
Such a coming together is believed to ultimately be more essential to the long-term future of Spriti rather than for JetBlue.