After ending bankruptcy just a few months ago, Spirit Airlines is facing tight financial constraints due to weak domestic demand and continuous decrease in cash reserves.
On Tuesday, August 12th, the stock price of its parent company Spirit Aviation Holdings (FLYY) plummeted by 40.68%. In a quarterly report released on Monday, the company cited unfavorable market conditions such as increased domestic capacity in the second quarter and weak demand for leisure travel as reasons for the challenging pricing environment faced by the airline.
The company expects these pressures to continue into the second half of this year, with increased operational uncertainties during this period. Last month, Spirit Airlines announced plans to lay off approximately 270 pilots and demote another 140 pilots in a cash-saving move.
Based in Florida, the airline has been operating in a state of consecutive losses, failed mergers, and escalating debts. It filed for bankruptcy protection in November last year, becoming the first major U.S. airline to do so since 2011. After court approval of a restructuring plan supported by its creditors, the company announced in March that it had emerged from bankruptcy.
On Monday, the company disclosed that its credit card processor required it to allocate more funds as collateral, or risk losing a contract set to expire on December 31. To address the credit card issue, Spirit Airlines plans to sell aircraft and real estate assets or convert them into cash, as well as reduce excess airport gate capacity to increase liquidity.
Acknowledging uncertainties in meeting minimum liquidity requirements and with negotiations with stakeholders still ongoing, the company admitted doubts about its ability to continue operations in the next 12 months.
(Reference: Reuters)