Spirit Airlines Reportedly Exploring Bankruptcy Filing, Shares Plunge

Spirit Airlines' shares plunged 30% in extended trading Thursday after reports emerged that the budget carrier is exploring filing for bankruptcy protection.

The airline is also negotiating an out-of-court agreement with bondholders to address its financial challenges following the collapse of its merger with JetBlue Airways, the Wall Street Journal reported citing people familiar with the matter.

The report said recent talks have focused on reaching a deal with bondholders and other creditors to support a Chapter 11 filing.

Reeling under a massive $3.3 billion debt load that is due to mature in just a few short years, the airline is in a race against time to negotiate new funding and debt relief.

Talks between the aircraft carrier and its creditors have reached an impasse over unresolved critical terms, a person with knowledge of the matter told Bloomberg. The report noted that there is no immediate plan for a bankruptcy filing, should Spirit Airlines pursue that option.

Meanwhile, the company has to reach a deal to extend or refinance bonds due 2025 by October 21 to maintain a key partnership with US Bank over its loyalty credit card.

Spirit Airlines acknowledged debt discussions with bondholder advisers after the WSJ report by referencing CEO Ted Christie's remarks during the second quarter earnings call. Christie had outlined efforts to address debt maturities in 2025 and 2026.

"Because those conversations are ongoing, we are not going to go into detail or take any questions on this topic or speculate on potential outcomes," Christie had said.

The latest development comes just months after Christie claimed the airline wasn't considering Chapter 11 bankruptcy and is "encouraged" by the plan it had in place after the deal with JetBlue fell apart.

Spirit and JetBlue scrapped their merger in March after a U.S. judge blocked the deal in January on anti-competition concerns. The JetBlue-Spirit merger, had it come to life, would have formed the fifth-largest US airline and would provide Spirit a much-needed financial lifeline, ensuring its survival.

"Spirit is confident in its strengths and is focused on returning to profitability. The company has been taking, and will continue to take, prudent steps to ensure the strength of its balance sheet and ongoing operations, including assessing options to refinance upcoming debt maturities," the company said in March after announcing the merger termination.