Spirit has been trying to put off bankruptcy by route cuts, getting rid of aircraft and shedding workers.

Frontier was looking to buy them, despite all of their troubles. They had previously been outbid by JetBlue in a merger attempt that was successfully blocked in court by the federal government.

Now it appears that’s off, and a Spirit bankruptcy is likely.

Spirit Airlines is preparing to file for bankruptcy protection after merger talks with Frontier Airlines broke down, according to people familiar with the matter. The Florida-based budget airline is in advanced discussions with bondholders to hammer out a bankruptcy plan that would have support from a majority of creditors…Frontier decided not to move forward with such a merger at this time…

BREAKING: Spirit Airlines' potential merger with Frontier breaks down, now preparing to file for bankruptcy$SAVE down 42% after hours pic.twitter.com/q7cmou2L8x

— Exec Sum (@exec_sum) November 12, 2024

It’s unclear why talks between Spirit and Frontier broke down. Perhaps Spirit wanted something for shareholders, and all Frontier would do is something like ‘$1 and assumption of debt,’ or perhaps Frontier sees a better opportunity to acquire the assets in bankruptcy with bondholders taking a haircut.

According to aviation analytics company Cirium, Spirit has been operationally reliable cancelling about 0.71% of flights in 2024 (behind only Southwest) and has operated approximately three quarters of its flights on-time. The carrier represents about 5% of U.S. airline capacity and is the only airline offering flights out of Latrobe, Pennsylvania, and Atlantic City, New Jersey. Spirit’s average fare in June and July was $68 one-way, excluding taxes and fees, compared to an average of over $200 for American, Delta, United and Southwest.

Any bankruptcy would likely mean continued flying, albeit with further route adjustments. Spirit’s mileage program (such as it is) would continued – it’s one of the most valuable assets the company has, and already mortgaged (with covenants that prevent actions that would diminish its value). Over time any reduction in service from Spirit does mean higher fares, though their aircraft would largely remain in demand.

Spirit Airlines wouldn’t have had a problem, of course, had the Justice Department not blocked JetBlue’s acquisition of the troubled carrier. It wouldn’t have mattered that its business model wasn’t a great product-market fit to the current environment, since JetBlue didn’t plan to keep the business model. JetBlue wanted Spirit for the pilots and planes to grow in ways necessitated by its partnership with American Airlines, which is expected to be back on the table with the turnover in administrations.