United Airlines Stock Soars As Spirit Faces Financial Collapse

On August 12, 2025, airline stocks surged after Spirit Airlines filed a “going-concern” warning with the SEC, expressing doubts about its ability to continue operations for the next 12 months. This crisis, just five months after the airline emerged from bankruptcy, triggered a rally led by United Airlines stock (NASDAQ: UAL), which gained 10%. American Airlines and JetBlue also saw significant gains of 12%, while Delta Air Lines, Alaska Air, and Southwest all rose as well.  That being said, if you seek an upside with less volatility than holding an individual stock, consider the High Quality Portfolio, which has comfortably outperformed its benchmark—a combination of the S&P 500, Russell, and S&P midcap index—and achieved returns exceeding 91% since its inception.

Image by Daniel Shapiro from Pixabay

Spirit Airlines’ Financial Crisis

Spirit’s distress stems from a perfect storm of challenges, including weak domestic leisure travel demand and high capacity, which together have created intense pricing pressure. The airline reported a second-quarter net loss of $245.8 million, up from $192.9 million in the same period last year.

The situation is dire due to several converging factors:

• A credit card processor has requested additional cash collateral and may terminate its contract at the end of the year.
• Spirit is furloughing 270 pilots and demoting 140 more.
• The airline is considering selling assets such as aircraft, real estate, and airport gate rights to generate cash.

How United Airlines and Others Benefit

If Spirit exits the market, United Airlines stands to gain significantly. United could acquire Spirit’s gates at Fort Lauderdale-Hollywood International Airport, a move that would be crucial for expanding its presence in Florida. This strategic acquisition would allow United to establish a competitive hub for its Latin American routes, challenging American Airlines’ dominance from its Miami hub and enhancing connectivity in the lucrative South Florida market. Additionally, United could benefit from acquiring Spirit’s gates at Los Angeles International Airport (LAX), where gate space is highly valuable and limited.

Industry-Wide Impact

Spirit’s potential departure would reshape the airline industry by removing an ultra-low-cost competitor, which could:

• Reduce Pricing Pressure: Airlines could increase fares on routes where Spirit previously kept prices low.
• Improve Market Share: Spirit’s 2-3% of the domestic market would be redistributed among remaining carriers. Legacy carriers like United, Delta, and American are likely to capture premium travelers, while low-cost airlines like Southwest and JetBlue would absorb price-sensitive passengers.
• Provide Asset Acquisition Opportunities: Other airlines could acquire Spirit’s valuable assets, including its young Airbus A320 fleet, airport slots, gates, and maintenance facilities, potentially at discounted prices.

Outlook

While the market is optimistic about reduced competition and potential fare increases, the situation’s final outcome is not yet determined. Spirit could still secure funding or find a merger partner. However, if it does cease operations, the benefits for major carriers like United could be substantial, though a major exit could also attract regulatory scrutiny regarding market concentration. Also, check out – Buy or Sell UAL Stock?

The immediate stock rally for United and other airlines signals investor confidence in their ability to capitalize on Spirit’s troubles.  However, it’s important to remember the meaningful risk involved when investing in a single, or just a handful, of stocks. Consider the Trefis High Quality (HQ) Portfolio which, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.

Invest with Trefis Market-Beating Portfolios
See all Trefis Price Estimates