Spirit Airlines is preparing to file for bankruptcy protection after merger talks with Frontier Airlines fell through, a report says. 

After the news broke at 5.30pm, the share price slumped 40 percent in seconds, wiping hundreds of millions of dollars off the value of the low cost carrier.

The Florida-based airline is in final negotiations with bondholders on a restructuring plan to secure the support of key creditors, the Wall Street Journal reported this evening. 

The airline could move forward with its bankruptcy filing within the next few weeks, sources familiar with the matter told the WSJ.