Summary
- Spirit Airlines had a better-than-expected Q4 2023 but still expects to post a loss throughout the quarter.
- The airline strengthened its balance sheet by selling aircraft and repaying debt, with $1.3 billion of liquidity at the tip of 2023.
- Spirit Airlines continues to be in negotiations with Pratt & Whitney regarding compensation for engine issues, which it believes will probably be a big source of liquidity in the longer term.
Spirit Airlines issued an update to its investors several days after the USA (US) District Court for the District of Massachusetts blocked its merger with JetBlue. In keeping with the low-cost carrier, its merger agreement with the latter stays intact, with the 2 airlines reviewing the choice and weighing their options going forward.
Positive but loss-making quarter for Spirit Airlines
Spirit Airlines detailed that while it had a better-than-expected Q4 2023, the corporate would still post a loss for the three-month period in an investor update on January 19, 2024. The airline said that the quarter’s revenue can be at the upper end of its previous guidance attributable to strong bookings throughout the Christmas and Recent 12 months travel period, with operating expenses being higher than expected due to lower fuel costs attributable to an improvement in fuel efficiency, lower airport costs, and other items.
Moreover, Spirit Airlines remarked that its operational performance and reliability were Consequently, its adjusted operating margin guidance for Q4 2023 was adjusted from negative 15% to 19% to between negative 12% and 13%. Its revenue estimates for the quarter are $1.3 billion, with its estimated Q3 2023 capability, measured in Available Seat Miles (ASM), growing by 14.8% in comparison with Q3 2022.
Photo: Vincenzo Pace I Easy Flying
The airline also stated that it had $1.3 billion of liquidity at the tip of the 12 months and a $300 million revolving credit facility. Certainly one of its steps to strengthen its balance sheet was to sell 25 of its aircraft in a sale-and-leaseback transaction price in December 2023 and January 2024, adding $419 million of net money to its liquidity reserves. Moreover, the transactions resulted within the repayment of $645 million of debt to the aircraft lessors.
Looking forward, it continues to be in negotiations with Pratt & Whitney regarding the Geared Turbofan (GTF), which is certainly one of the engine options for the Airbus A320neo aircraft family groundings. In keeping with Spirit Airlines, the negotiations with the engine maker have been progressing, yet an agreement has yet to be reached.
Spirit Airlines’ CEO Expresses Frustration With Pratt & Whitney Engine Issues
It could take as much as eight weeks to examine the engines, allowing aircraft to return to service.
Denying bankruptcy plans
Shortly after the District Judge announced his decision to dam the merger between JetBlue and Spirit Airlines, Helane Becker, a managing director and senior analyst at TD Cowen, predicted that the airline would either be on the lookout for one other buyer or enter into Chapter 11 bankruptcy proceedings and even liquidate. The latter scenario was more likely, based on Becker.
Photo: Lukas Souza | Easy Flying
Nevertheless, a Spirit Airlines representative told Bloomberg that the airline has no plans to restructure via bankruptcy proceedings. In the identical investor update, the low-cost carrier reiterated that its merger agreement with JetBlue Because the two airlines have stated beforehand, the pair is currently reviewing the judge’s decision and evaluating the subsequent steps.
Merger Blocked: What’s Next For JetBlue & Spirit Airlines
Seemingly, JetBlue and Spirit Airlines need to different futures ahead of them following a judge’s ruling against their merger.