Home Debt Spirit to rework debt as it and JetBlue appeal merger ruling

Spirit to rework debt as it and JetBlue appeal merger ruling

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JetBlue Airways (B6, New York JFK) and Spirit Airlines (NK, Fort Lauderdale International) have said they will continue their legal battle to keep their tie-up alive, announcing late on Friday, January 19 that they will appeal a federal judge’s decision to block JetBlue’s planned USD3.8 billion acquisition of the ultra-low-cost carrier.

The two airlines “reported that they have jointly filed a notice of appeal to the US Court of Appeals for the First Circuit, consistent with the requirements of the merger agreement,” the brief statement said. Often such appeals can take months to process. JetBlue’s deadline to close the merger is in July, but the two sides could agree to extend it.

The judge’s ruling had argued that the long-planned deal would violate antitrust law because the price-conscious consumers who “rely on Spirit’s unique, low-price model would likely be harmed”. In doing so, he agreed with the Department of Justice and state attorneys general from six states and the District of Columbia who filed the lawsuit in March 2023.

The appeal comes as Spirit encounters financial headwinds, including the impact of the grounding of a sizeable chunk of its fleet due to Pratt & Whitney geared turbofan (GTF) engine availability issues. According to ch-aviation fleets advanced data, thirteen of its eighty-four A320-200Ns are currently inactive. It has a further forty-one of the type due for delivery. In total, Spirit operates 203 aircraft, all of them Airbus narrowbodies.

In an investor update also released on January 19, Spirit said it had been in negotiations with the engine maker over “fair compensation for the financial damages” related to the issues, discussions which “have progressed considerably since October, and while no agreement has been reached to date, the company believes the amount of compensation it will receive will be a significant source of liquidity over the next couple of years.”

It has been grappling with rising operating costs and ongoing supply-chain problems. It also said in the investor update that it was “assessing options to refinance its 2025 debt maturities”, including USD1.1 billion aggregate principal amount of 8% senior secured notes.

The company recounted that it took several steps to shore up its liquidity during the fourth quarter in an effort to return the business to sustainable profitability, such as extending the final maturity of a revolving credit facility to September 30, 2025. It also, in December and January, completed sale-leaseback transactions for 25 aircraft, resulting in the repayment of about USD465 million of debt on those aircraft.

In an emailed statement to Bloomberg on January 18, the airline emphasised: “Spirit is not pursuing or involved in a statutory restructuring.”

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