JetBlue and Spirit appeal court decision blocking their merger

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Shares of troubled Spirit Airlines rebounded more than 20% in trading Friday as the company tried to assure investors that a court decision blocking its purchase by JetBlue Airways would not force it out of business.

In a securities filing, Spirit also said it hasn’t given up on a potential purchase by JetBlue, despite a federal judge’s ruling Tuesday blocking the deal on antitrust grounds.

The discount airline said in the filing that it expects to beat analysts’ expectations for the end of the year. But that doesn’t mean a profit — it just means the company believes it will lose less money than predicted in the fourth quarter, which would still leave it in a worse position than the fourth quarter of 2022. The company also wants to refinance $1.1 billion in debt due in September 2025.

Shares of Spirit fell 47% in trading Tuesday after the court blocked the acquisition by JetBlue and another 22% on Wednesday. A note by Cowen airline analyst Helane Becker late Wednesday speculated that Spirit could be forced to liquidate because aircraft leasing companies, which own more than half of Spirit’s 200-plus Airbus jets, would be more likely to repossess the planes and find other customers rather than to negotiate new financing terms.

Other analysts didn’t predict bankruptcy or liquidation, but still forecast a difficult course for Spirit trying to make it on its own. JPMorgan Chase’s airline analysts wrote in a note that while “we are not (yet) predicting an immediate” bankruptcy filing by Spirit, “we can not reasonably identify a viable return to profitability any time soon.”

In its guidance Friday, the airline said its revenue should come in at $1.32 billlion, a bit better than the forecast of $1.31 billion. It put its operating losses between $158 million to $172 million, down from the $178 million operating loss in the third quarter, and better than forecasts of a $197 million loss.

But the quarter will still be worse than the fourth quarter of a year ago when it had revenue of $13.9 billion and an adjusted operating profit of $58 million.

All US airlines were hemorrhaging billions during the first two years of the pandemic, despite receiving billions of dollars of federal assistance to keep flying and prevent widespread layoffs. But as demand for air travel bounced back in 2022, so did profitability at the larger carriers.

But smaller carriers — like Spirit — that offer lower fares to attract bargain-hunting leisure travelers have continued to struggle. Following $1 billion in losses in 2020 and 2021, the company lost $264 million in the first nine months of 2023. It is forecast to lose another $175 million for the final three months of 2023, and an additional $310 million in losses this year, according to analysts surveyed by Refinitiv.

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