With merger scuttled, Spirit Airlines faces an uncertain future. Is bankruptcy a possibility?

Spirit Airlines hasn't made money since before the pandemic, ticket sales haven't bounced back as quickly as the carrier expected, and dozens of its planes will be grounded at times this year because of a problem with the engines.

A sale to JetBlue represented a lifeline for Spirit, which faces $1.1 billion in debt maturing next year.

But a federal judge in Boston scuttled that plan by ruling Tuesday that JetBlue's $3.8 billion proposal to buy Spirit violates antitrust law.

Now, some Wall Streeters who follow Spirit are tossing around the B word -- bankruptcy. The judge had even hinted at such an outcome during the trial.

After Judge William Young's ruling on Tuesday, Spirit can look for another buyer, or it could remain independent and try to push through a difficult environment for budget airlines.

But "a more likely scenario is a Chapter 11 filing, followed by a liquidation," wrote Helane Becker, a veteran airline analyst for financial-services firm Cowen. "We recognize this sounds alarmist and harsh, but the reality is we believe there are limited scenarios that enable Spirit to restructure."

JPMorgan analyst Jamie Baker wasn't willing to go quite that far, but he too drew a grim picture for Spirit, which has the ticker symbol "SAVE."

"We are not (yet) predicting an immediate SAVE chapter 11 filing, just an acknowledgement that we cannot reasonably identify a viable return to profitability any time soon," Baker and colleagues wrote in a note to clients.

Baker noted that Spirit recently raised $419 million by mortgaging many of its planes. But, he added, "from here its liquidity-raising cupboard does not appear robust."

Fitch Ratings said Spirit's credit profile is now "under pressure" after the court defeat. "We believe that Spirit needs to clearly articulate a near-term plan to preserve and generate liquidity, address its refinancing risk, and improve profitability to avoid" a rating downgrade, the credit-rating agency said.

Spirit did not respond directly to those comments. A spokesperson for the airline pointed to a regulatory filing two weeks ago, in which the airline disclosed that it had raised $419 million through sale-and-leaseback agreements covering 25 planes.

In a joint statement Tuesday, Spirit and JetBlue said they disagreed with the ruling that blocks their merger and were considering their next legal step.

Judge Young stopped short of granting the government's wish for a permanent injunction against any merger between JetBlue and Spirit. During the trial, Young was troubled that such a sweeping order would be too restrictive in the ever-changing airline business.

"We are not going to get anywhere if you win, the merger isn't approved, and Spirit goes belly-up," the judge said to a Justice Department lawyer during closing arguments in December.

Spirit, based in Miramar, Florida, last turned a full-year profit in 2019. It has lost more than $1.6 billion since then.

On Wednesday, Bank of America analysts downgraded Spirit stock to "underperform," suggesting there is a risk the airline might not be able to make debt payments due in September 2025.

Spirit is also hindered by necessary inspections and possible replacement of Pratt & Whitney engines on many of its Airbus jets because of a manufacturing defect. The airline has predicted that it will average 26 grounded planes -- more than 10% of its fleet -- during 2024, causing "a dramatic decrease in the company's near-term growth projections."

Frontier Airlines tried to buy Spirit before JetBlue started -- and won -- a bidding war last year. But Frontier has its own challenges and is in no position to renew merger discussions with Spirit now, Baker said.

Spirit shares fell 22% Wednesday after plunging 47% on Tuesday. JetBlue shares lost a more modest 9% on Wednesday, which might reflect investors breathing a sigh of relief that the purchase of Spirit appears dead, at least for now.

Baker said "JetBlue dodges a bullet" because of the federal judge's ruling. Under CEO Robin Hayes -- who is stepping down next month -- JetBlue wanted the planes and pilots that it would have gained through buying Spirit, but "the price was simply just too much to pay," in Baker's view.

Like Spirit, JetBlue has not had a profitable year since 2019, before the pandemic. But relative to its size, JetBlue's losses are more manageable than Spirit's, and it has a stronger balance sheet, according to analysts.

Investors are also trying to gauge what the ruling against the JetBlue-Spirit deal means for Alaska Airlines' pending proposal to buy Hawaiian Airlines. The Biden administration hasn't said whether it will sue to block that deal too.

Deutsche Bank analyst Michael Linenberg said the government's success in blocking both the JetBlue-Spirit deal and a previous partnership between JetBlue and American Airlines "are likely to cast a shadow over future airline (merger and acquisition) activity, with the Alaska--Hawaiian deal potentially in the sights of regulators."