Call it the aftermath of a failed merger with JetBlue, signs are visbile of a troubled carrier, as Spirit Airlines is looking to buy itself more time to figure things out. Since the collapse of merger efforts, Spirit has been scrambling to secure its future, especially as it has more than $1 billion in debt coming due through 2026.
The company announced Monday that it would be furloughing 260 pilots and deferring deliveries for some of the Airbus aircraft it has on order.
In a statement, Spirit Airlines President and CEO Ted Christie said ,
The moves are "an important part of Spirit's comprehensive plan to bolster profitability and strengthen our balance sheet," .
The deferrals affect all the Airbus aircraft previously scheduled to be delivered to the Florida-based carrier in the second quarter of 2025 through the end of 2026 to 2030-2031, but does not affect "direct-lease" planes set to arrive through 2029.
"Deferring these aircraft gives us the opportunity to reset the business and focus on the core airline while we adjust to changes in the competitive environment," Christie said, adding it will free up cash "as we position the company for a return to profitability."
A manufacturing snag with Pratt & Whitney Geared Turbofan (GTF) engines has forced Spirit to ground some of its A320neo aircraft, pinching the company at a time when it is already grappling with a cash crunch due to rising operating costs and lingering supply chain problems.
Spirit Airlines expects to receive anywhere from $150 million to $200 million in compensation for grounding some of its planes due to issues with Pratt & Whitney engines.
A regulatory filing by the company said that it entered an agreement with International Aero Engines, an affiliate of Pratt & Whitney, to receive a monthly credit throughout 2024 for the grounded planes.
Meanwhile, the pilots targeted for furlough will go on hiatus beginning September 1. This step might make negotiations awkward for the union contract that Spirit will soon be negotiating with the Air Line Pilots Association.
"We are doing everything we can to protect team members, while balancing our responsibility to return to positive cash-flow and thrive as a healthy company with long-term growth prospects," the CEO said.
Together, the moves are expected to save the carrier $340 million over the next two years. Requirements are such, to increase its liquidity, the carrier recently sold 25 aircraft and leased them back, allowing it to pay down $465 million in debt and net $419 million in cash.
Spirit Airlines posted a net loss of $447.5 million in 2023 -- down from a loss of $554 million in the previous year, partially driven by a decrease in the cost of jet fuel.
The carrier remains unprofitable in the wake of the failed merger with competitor JetBlue. The two airlines called-off their long-planned combination last month after a federal judge blocked the transaction because it violated antitrust laws.
Attorney General Merrick Garland said on March 4,
"The Justice Department proved in court that a merger between JetBlue and Spirit would have caused tens of millions of travelers to face higher fares and fewer choices."
Ted Christie called the comments of analysts as “misguided narrative” in February, when it was assumed that the airline may need to file for bankruptcy or find another buyer, after its merger with JetBlue collapsed.
Spirit Airlines News From The Past.....
