Shares of Spirit Airlines (NYSE:SAVE) experienced a third consecutive day of decline on Thursday following concerns among investors about the financial outlook of the low-cost carrier. The decline was exacerbated after a U.S. judge blocked the airline’s proposed $3.8 billion merger with JetBlue Airways (NASDAQ:JBLU). During morning trade, Spirit’s stock saw a 15% decrease, partially attributed to Citi downgrading its rating from “neutral” to “sell.” Since the merger was halted due to anti-competition concerns on Tuesday, Spirit has lost more than half of its market value.
The financial challenges faced by the ultra-low-cost carrier, driven by high operational costs and persistent supply-chain issues, have raised uncertainties about its ability to address the outstanding debt due next year. JetBlue, on the other hand, experienced a marginal 1% increase in its shares during morning trade.
While JetBlue and Spirit have the option to appeal the court ruling, Citi analyst Stephen Trent questioned the rationale behind pursuing a risky bid on a highly leveraged carrier facing substantial losses. Some analysts speculate that Spirit might consider filing for bankruptcy to streamline its balance sheet and undergo a financial reorganization, aiming to emerge as a more robust airline.
In the aftermath of the merger setback, Fitch, a credit rating agency, highlighted Spirit’s heightened turnaround risk and “significant refinancing risk” in the coming year, particularly with its $1.1 billion loyalty program debt scheduled for repayment in September 2025.
Comparing key financial metrics, Spirit’s enterprise value to sales ratio for the next 12 months stands at 1.3, whereas JetBlue’s is at 0.6, according to LSEG data. A lower ratio suggests a more appealing investment opportunity, reflecting the challenges Spirit now faces in the aftermath of the blocked merger.
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Author Faith Yakubu 
