(Reuters) – Shares of Spirit Airlines extended losses to a third straight session on Thursday over lingering concerns around the company’s future after a U.S. judge blocked its $3.8 billion merger with JetBlue Airways.
Spirit was down about 6% before the bell, partly due to Citi downgrading its rating to “sell” from “neutral”. The stock has shed more than half of its value since the deal was blocked over anti-competition concerns on Tuesday.
The ultra-low-cost carrier’s profitability struggles, driven by high operational costs and persistent supply-chain issues, have triggered doubts about the firm’s capacity to settle its outstanding debt due next year.
JetBlue shares were up 1.4% in premarket trading.
“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.
Some analysts said the company might contemplate a bankruptcy filing to streamline its balance sheet and reorganize into a financially robust airline.
Following the merger ruling, Spirit faces increased turnaround risk and “significant refinancing risk in the next year with its $1.1 billion loyalty program debt coming due in September 2025,” credit rating agency Fitch said in a report on Wednesday.
Spirit’s ratio of enterprise value to sales for the next 12 months is 1.3, compared with 0.6 for suitor JetBlue, according to LSEG data. A low ratio implies a more attractive investment opportunity.
(Reporting by Shivansh Tiwary in Bengaluru; Editing by Devika Syamnath)
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