While its rock-bottom ticket prices have earned it a following of loyal fans, the Florida-based Spirit Airlines (SAVE) has been facing serious financial problems.
In its latest earnings call last February, the budget airline had reported a net loss of $183.65 million, or $1.68 per share. While this is an improvement from the $270.66 million it reported for the same quarter a year ago, it adds to a series of unprofitable quarters dating back several years.
Related: Spirit lost a staggering amount of money during the summer period
After a federal judge blocked JetBlue Airways (JBLU) “Hail Mary” plan to acquire Spirit for $3.8 billion in February 2024, the airline’s financial future landed under the microscope as several financial analysts floated the possibility of a bankruptcy.
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Laying off pilots, delaying new planes: Spirit announces new austerity measures
Spirit started this week by announcing that its efforts to improve liquidity includes placing 260 of the pilots who work for it on furlough and delaying the deliveries of new Airbus (EADSF) planes that it had planned to purchase from 2025 into 2030-2031.
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“This amendment to our agreement with Airbus is an important part of Spirit's comprehensive plan to bolster profitability and strengthen our balance sheet,” Spirit CEO and President Ted Christie said in a statement. “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 also added that this does not affect the delivery schedule of the planes Spirit had ordered for 2027 and 2028.
The affected pilots will go on furlough from Sept. 1 and were informed in a memo that they will be called back if something changes and the airline is able to pay them again.
‘Return to positive cash-flow and thrive as a healthy company’
“I am extremely proud of our dedicated Spirit team for their focus and resilience over the last few years,” Christie said further. “Unfortunately, we had to make the difficult decision to furlough pilots given the grounded aircraft in our fleet and our deferral of future deliveries.”
He gave the usual corporate talking points of “doing everything we can to protect team members” while also being mindful to its “responsibility to return to positive cash-flow and thrive as a healthy company with long-term growth prospects.”
Spirit stock immediately responded to the change and rose nearly 5% from Monday by Tuesday morning. The $4.94 per share we see now is down nearly 70% from the start of the year; stock has taken a particularly hard tumble since the JetBlue merger was called off and some analysts have doubted whether such measures will be enough to bring the airline back to any sort of profitability given the structural business problems it faces.
“We believe Spirit is likely to look for another buyer but a more likely scenario is a Chapter 11 filing, followed by a liquidation,” Cowan Aviation Analyst Helane Becker wrote in a note to her clients in January 2024. “We recognize this sounds alarmist and harsh, but the reality is we believe there are limited scenarios that enable Spirit to restructure.”
