Spirit Airlines (OTC:FLYYQ) is preparing for a potential shutdown after a proposed financial rescue package failed to come together, according to a Wall Street Journal report citing people with knowledge of the matter.
The ultra-low-cost carrier had been seeking roughly $500 million in emergency funding intended to stabilize its finances and keep operations running.
However, support from key bondholders and government stakeholders has not materialized in a way that would allow the deal to move forward, the sources said.
As a result, Spirit is running low on cash, raising the prospect that it may be unable to continue flying if an alternative financing solution is not found quickly. The situation remains fluid, and discussions around potential restructuring or renewed support efforts are ongoing.
The Wall Street Journal reported that the rescue effort has stalled amid disagreements among creditors and uncertainty over government backing. Earlier reporting from the publication indicated that rising operating costs, including higher jet fuel prices, and Spirit’s weakened balance sheet have contributed to financial strain as the airline has worked through bankruptcy proceedings.
Creditors have also reportedly weighed more severe outcomes, including liquidation, depending on whether a viable restructuring plan can be agreed upon.
At the same time, policy discussions have taken place at the government level regarding potential assistance, underscoring the broader implications of a possible shutdown for employees and the aviation sector.
Shares of Spirit plummeted on the news, down about 63% at $0.52 in the early afternoon on Friday.