Spirit Airlines warned it could be forced to halt operations within a year if its balance sheet doesn't improve.
In an Aug. 11 regulatory filing, Spirit said it intends to take additional measures to bolster liquidity, potentially including sales of aircraft, real estate and excess gate capacity. The carrier will also search for more costs to cut.
Spirit reported a second-quarter net loss of $245 million, a $184 million operating loss and a dismal operating margin of minus-18.3%. The airline said there was weak domestic leisure demand and a challenging pricing environment in Q2, and it expects that to continue through the remainder of the year.
The airline noted steps taken to reduce costs and improve revenue, including an upcoming furlough of 270 pilots, the introduction of retrofitted cabins with seven rows of extra-legroom seats, and the sale and leaseback of spare engines.
Despite those efforts, Spirit said its debt obligations and credit card processing agreement require financial results to improve at a rate faster than the company is anticipating.
The carrier said that if further sells-offs and other actions are not successful, "management believes it is probable that the company will be unable to comply with the minimum liquidity covenants under the company's debt obligations and credit card processing agreement at some point in the next 12 months."
Frontier Airlines, Spirit's main competitor among ultralow-cost carriers, expects Spirit's demise.
"We are going to be last man standing in the low-cost space next year," Frontier CEO Barry Biffle said during Frontier's Q2 earnings call on Aug. 5.
Spirit entered 2024 in the midst of Chapter 11 bankruptcy restructuring and with $902.1 million in unrestricted cash and cash equivalents. Despite emerging from bankruptcy in March having converted $795 million in debt to equity, the airline's cash and cash equivalents had dwindled to $407.5 million by June 30.