Spirit Airlines shutdown row: Why JetBlue and Frontier stocks are surging amid $500M bombshell report
Shares of JetBlue Airways and Frontier Airlines surged Friday after reports that rival carrier Spirit Airlines could be preparing to halt operations following failed bailout discussions. By around 11 AM ET, JetBlue stock had climbed 7.4%, while Frontier rose 8.8% as investors reacted to growing uncertainty surrounding Spirit’s future.
What triggered the airline stock rally?
The jump came after a Wall Street Journal report stated that Spirit Airlines’ anticipated rescue agreement with the US government had collapsed. According to the report, Spirit’s bondholders did not back the proposed restructuring plan, creating major uncertainty around the struggling airline’s ability to continue operating.
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The Wall Street Journal further reported that Spirit Aviation Holdings Inc. is now preparing to cease operations after bailout negotiations broke down.
Bloomberg earlier reported that discussions over a potential $500 million government rescue financing package had stalled. The report said a lender group that includes Citadel opposed terms that could heavily damage their claims and financial recoveries.
Spirit shares crash after shutdown fears
Spirit Airlines shares plunged as much as 74% after news surfaced that the company was allegedly preparing for a shutdown scenario.
Meanwhile, competitors including JetBlue and Frontier benefited from speculation that reduced competition in the low-cost airline market could improve pricing power and passenger demand for surviving carriers.
Spirit says operations continuing ‘as usual’
Despite the alarming reports, Spirit has not officially confirmed plans to stop operating. A company spokesperson, speaking to Bloomberg, declined to discuss ongoing negotiations but stressed that flights and operations are continuing normally for now.
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What were Spirit’s plans before shutdown report
Only last month it was reported that the White House was considering a plan to use part of the bankrupt carrier’s fleet for military missions. President Donald Trump was supposed to invoke the Defense Production Act to loan Spirit Airlines money for national defense purposes, as per BREAKING NEWS.
The publication further added that the Pentagon would then use the airline’s ‘excess capacity for transporting troops, military cargo or other missions’. However, the deal depended on Spirit’s creditors.