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Spirit Airlines, a company currently facing financial difficulties, is taking significant steps to prevent bankruptcy and regain profitability. As Hippocrates, the ancient Greek physician, once said, “desperate times call for desperate measures,” and this rings true for Spirit Airlines (SAVE). In an official regulatory filing on October 24, the airline revealed a series of drastic measures aimed at improving its financial situation, including the sale of aircraft and the reduction of personnel.
The news of these measures caused a surge in Spirit’s shares, which experienced a significant increase on Friday, ultimately closing at $2.79, reflecting a 15.3% increase. The company announced its plans to generate $519 million by selling 23 vintage Airbus aircraft to GA Telesis, an aircraft-maintenance and component services platform. These aircraft are scheduled to be delivered from this month to February 2025. Additionally, Spirit announced its intention to reduce costs by approximately $80 million, primarily through job cutbacks.
Spirit Airlines had previously disclosed in August its decision to reduce the number of commanders by around 100 and terminate approximately 240 pilots. The company further shared its plans to implement a temporary recruiting freeze for flight attendants and pilots, while also offering current cabin crew members voluntary unpaid leave. These measures are part of a larger effort to streamline operations and cut expenses in order to safeguard the company’s financial health.
In light of its financial struggles, Spirit Airlines faced challenges with its proposed merger with JetBlue being thwarted by a judge. Additionally, there were reports of a possible merger investigation between Frontier Airlines and Spirit. However, the Wall Street Journal reported that this deal did not materialize. Frontier had previously made an offer to acquire Spirit for $2.9 billion but was outbid by JetBlue’s $3.8 billion bid. Despite this, a federal magistrate denied the proposed merger with JetBlue on antitrust grounds, with the ruling emphasizing the importance of fair competition in the airline industry.
While financial analysts have expressed concern over Spirit’s financial stability, there have been contrasting opinions on the company’s potential for recovery. Wall Street veteran Stephen Guilfoyle highlighted Frontier Airlines as a superior investment option due to its comparative financial performance, despite its speculative nature. He emphasized the necessity of careful consideration before making investment decisions to ensure prudent financial management.
Spirit Airlines saw fluctuations in its stock value following reports of ongoing discussions with bondholders regarding a potential restructuring plan that could involve a Chapter 11 filing. However, a debt refinancing agreement enabled the company to navigate away from immediate bankruptcy risks, resulting in a temporary stabilization of its financial position. Notably, Spirit reported that Visa and Mastercard had agreed to postpone a $1.1 billion loyal bond debt until December 23, providing breathing room for the airline to address its financial obligations.
Looking ahead, Spirit anticipates further reductions in its capacity, with plans to release detailed financial performance results in November. The company expects a mid-teens annual decrease in capacity for the entirety of 2025, reflecting the impact of restructuring efforts and changes in aircraft fleet. Issues with Pratt & Whitney geared turbofan engines have necessitated the grounding of A320neo aircraft, further affecting Spirit’s operational capacity and financial forecasts.
Despite these challenges, Spirit Airlines aims to maintain over $1 billion in liquidity by the end of 2024, supported by a strategic combination of cash reserves, financial instruments, and liquidity initiatives. By implementing these significant measures and adapting to industry challenges, Spirit Airlines is working towards a sustainable financial future and ensuring its continued presence in the aviation market. Through prudent financial management and operational efficiency, the airline is positioning itself for long-term success and profitability.
