(Reuters) -Spirit Airlines (SAVE) is in constructive discussions with its creditors and continues to explore strategic alternatives to improve liquidity, the ultra-low-cost carrier said on Tuesday.

Negotiations, with a supermajority of bondholders, have remained productive, have made material progress and will resume shortly, it added.

If the deal fails, it will lead to the cancellation of existing equity and all alternatives will be considered, the statement said.

The company said adjusted operating margin in the third quarter would be 12% lower than last year.

Earlier in the day, the Wall Street Journal reported that the company is preparing to file for bankruptcy protection after merger talks with Frontier Airlines collapsed.

The company did not immediately respond to a Reuters request for comment.

The company’s shares fell 39% to $1.8 after the bell. The stock is down nearly 80% this year, while the S&P 500 passenger airline index rose 52%.

The Dania Beach, Florida-based airline has been losing money despite strong travel demand. The country has failed to make a profit in the past five out of six quarters, raising doubts about its ability to manage looming debt maturities.

Spirit said in October it would lay off about 330 pilots by Jan. 31 as part of its efforts to cut costs and shore up its finances.

The company is also selling 23 older Airbus aircraft for $519 million. The sale proceeds are expected to provide $225 million in liquidity next year.

(Reporting by Aishwarya Jain in Bengaluru and Urvi Dugar; Editing by Maju Samuel and Alan Barona)