In response to its financial difficulties, Spirit Airlines (SAVE) has announced a series of significant measures aimed at preventing bankruptcy. These measures have been put in place to regain profitability and ensure the long-term sustainability of the airline.
On October 24, Spirit Airlines disclosed a number of drastic steps it plans to take in order to address its financial challenges. One of the key measures outlined in a regulatory filing is the sale of 23 vintage Airbus aircraft to GA Telesis, an aircraft-maintenance and component services platform. This transaction is set to generate $519 million for the airline and is scheduled to be completed by February 2025.
In addition to selling aircraft, Spirit Airlines also announced plans to reduce costs by approximately $80 million through job cutbacks. This includes reducing the number of commanders by 100 and terminating approximately 240 pilots. The airline is also implementing a temporary recruiting freeze for flight attendants and pilots and offering current cabin crew members voluntary unpaid leave.
These cost-cutting measures come in the wake of a failed attempt at a merger between Spirit Airlines and JetBlue. In 2022, Frontier Airlines had made an offer to acquire Spirit for $2.9 billion, but JetBlue ultimately outbid Frontier with a $3.8 billion offer. However, a federal magistrate denied the proposed merger with JetBlue in January, citing concerns about anti-competitive practices.
Amidst these challenges, Spirit Airlines has seen fluctuations in its stock price. Reports of discussions with bondholders regarding a restructuring plan that could involve a Chapter 11 filing caused a decline in the airline’s shares. However, the completion of a debt refinancing agreement helped boost the stock price temporarily.
Spirit Airlines also reported securing an additional $300 million in revolving debt from creditors, bringing its total liquidity to approximately $1 billion. This additional funding has helped the airline stave off the immediate threat of bankruptcy and provided some stability amid its financial troubles.
Looking ahead, Spirit Airlines anticipates a decrease in capacity for the remainder of 2024 and into 2025. The airline plans to provide further details on its third-quarter performance in mid-November and projects a capacity reduction by the mid-teens on an annual basis for the entirety of 2025.
The decrease in capacity is attributed to several factors, including the sale and removal of aircraft from scheduled service, a shortage of Pratt & Whitney geared turbofan engines, the retirement of older A319ceo aircraft, and the addition of new A321neo aircraft. The grounding of A320neo aircraft due to engine issues has also impacted Spirit’s capacity.
Despite these challenges, Spirit Airlines remains focused on maintaining liquidity and implementing cost-saving measures to ensure its financial stability. The airline is committed to regaining profitability and positioning itself for long-term success in the competitive airline industry.