Shares of Spirit Aviation Holdings, the parent company of Spirit Airlines, plummeted on Tuesday after the company warned of "substantial doubt" about its ability to stay in business.

St. Louis

Spirit Airlines' parent company, Spirit Aviation Holdings, has warned investors of 'substantial doubt' regarding its ability to continue operating, following a significant drop in its share price. The warning was included in the company's latest quarterly earnings report, which cited weak demand for domestic leisure travel and increased competition as major factors impacting its financial health.

Despite having restructured its debt after emerging from bankruptcy, Spirit continues to lose money each month and is burning through cash reserves. The company indicated that unless it can raise additional capital or cut unprofitable routes, it may run out of funds within the next year. For now, Spirit is operating as usual, and travelers with upcoming bookings are not affected. The airline's CEO emphasized that the warning is required regulatory language and represents a worst-case scenario.

Spirit Airlines warns of potential inability to stay in business

As we reported earlier, shares of Spirit Aviation Holdings, the parent company of Spirit Airlines, plummeted today after the company warned of quote substantial doubt about its future to stay in business and its quarterly earnings report. The airline cited factors, including weak demand for domestic leisure travel. CBS News senior transportation correspondent Chris Van Cleve joins us now and Chris. Great to have you with us. You know this morning as you well know, from Chapter 11 bankruptcy. So what kind of challenges is the airline facing now? And more importantly, what does this mean for air travelers? Well, you know, Spirit is facing sort of a double whammy. There's been a reduction in demand for domestic leisure travel, particularly from their core customer, who is a very budget conscious at the same time as all the other airlines have seen a decrease in domestic demand. So there's more seats in the marketplace that can be purchased. And that makes it hard to raise airfares. They stay low. It's resulting in spirit, burning more cash, losing money month to month. So while they came out of bankruptcy and restructured their debt, they're still not profitable, so they're burning money every month. That's creating a situation where if they're not able to raise more money, if they're not able to cut unprofitable routes. Raise capital. They warned investors that over the next 12 months there is the potential that they run out of money. Essentially now Spirit CEO in a letter to employees today said. This is necessary required regulatory language we have to use, and that is a worst case scenario. That's if we don't make changes, but we are making changes. Essentially tried to downplay the dire sounding warning in this regulatory filing, but bottom line, spirits losing money and they're burning cash, which puts them in a situation where they could run out of money if they can't raise more money. What would that mean for flyers? Well today, if you have a ticket booked on Spirit for Labor Day weekend or next month, don't need to worry about it. They are operating as business as usual. This is many months away from where this might hit a tipping point, but spirit much like Frontier, they're an ultra low cost carrier. When they go into a market, they bring down prices. They may be flying United, but if they're competing against spirit, they are making some tickets available in the same price range as spirit. That is also part of what's squeezing spirit because if you can pay about the same amount of money to fly United, Delta or American that may have more flight options, a better network. People are switching over and taking those basic economy flights on United American and Delta which further squeezes spirit so it is a. It is a fine line for them to walk at yeah, big 12 months ahead for them. Chris Van Cleve. Thanks so much for being with us. Sure thing.

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