Spirit Airlines is witnessing a surge in its stock prices despite the looming risk of bankruptcy and the decision to block the JetBlue merger.

Spirit Airlines (SAVE) experienced a surge in its stock prices on Friday following reports that the airline is urging JetBlue (JBLU) to appeal a decision that nullified their $3.8 billion merger. In essence, Spirit Airlines is encouraging JetBlue to challenge the ruling and proceed with the planned merger.

Spirit Airlines, specializing in budget-friendly short flights, has been grappling with financial difficulties for an extended period. These challenges stem from a sizable debt, an increase in jet fuel prices, and struggles in recruiting an adequate workforce.

The price of jet fuel, a significant part of airlines’ expenses, has risen more than crude oil costs in the past eight months. This increase in oil prices is due to OPEC, a group of oil-producing countries, agreeing to reduce production and concerns about the oil supply in the Gulf region.

Delta Air Lines (DAL) recently reported that their spending on fuel in the last quarter of the year was $2.9 billion, marking a 6% increase compared to 2022. Looking forward, they anticipate fuel costs in the first quarter of 2024 to be in the range of $2.50 to $2.70 per gallon.

Spirit Airlines faced problems with its Airbus A320neo planes after a summer inspection of engines by Pratt & Whitney, a division of RTX Corp. This led to a reduction in the number of flights they could operate. Additionally, the airline experienced increased operating costs.

These challenges have put significant financial pressure on Spirit Airlines, based in Florida. The company has over $1.1 billion in debt tied to its loyalty program, and this debt is due for payment next year.

To overcome the risk of refinancing on its own, Spirit Airlines must regain the market’s trust by developing a solid plan. This plan needs to enhance their operations and strategy, ensuring better profitability and enough cash flow. Fitch Ratings highlighted this in a recent credit opinion.

The decision to appeal the SAVE-JBLU (Spirit-JetBlue) merger is a complex one, involving legal, financial, and strategic considerations

Spirit Airlines aimed to team up with JetBlue in a $3.8 billion deal to tackle financial issues, but the plan hit a roadblock when a judge and the U.S. Department of Justice expressed worries about the impact on customers who rely on Spirit’s affordable prices.

Now, Spirit is in a tough spot, facing potential challenges like bankruptcy. They’re urging JetBlue to appeal the judge’s decision and join forces with them. Spirit disagrees with the ruling, insisting that partnering with JetBlue is the best way to bring more competition, choices, and affordable prices to customers.

Spirit argues that JetBlue has already taken steps to address concerns raised by the Department of Justice, making the deal less likely to harm competition.

Joining forces with Spirit in a merger might be a wise move for JetBlue.

JetBlue is facing challenges like air traffic delays in the Northeast and issues after ending its partnership with American Airlines. They’re also having trouble with plane engines.

Spirit Airlines is working on solutions too, looking to refinance debt and get compensation for engine problems. They plan to increase flights this year, expecting to make more money with lower costs and increased bookings.

After Spirit’s shares dropped significantly following the judge’s decision, they rose by 22.5% in premarket trading to $6.99 each. JetBlue’s shares also increased slightly to $5.08 each.

Investors are now considering the impact of the decision against the JetBlue-Spirit deal on Alaska Airlines’ attempt to buy Hawaiian Airlines. It remains uncertain whether the government will intervene in this deal as well.

Deutsche Bank analyst Michael Linenberg suggests that the success of the government in blocking both the JetBlue-Spirit deal and a previous partnership between JetBlue and American Airlines might influence future airline mergers. He speculates that regulators might closely scrutinize the Alaska–Hawaiian deal due to these earlier rulings.