Fitch Ratings has affirmed the Long-Term Issuer Default Rating for Spirit Airlines at 'BB+'. The Rating Outlook is Stable. Fitch has also affirmed the ratings on Spirit's 2015-1 series of enhanced equipment trust certificates.
The rating is supported by Spirit's solid profitability, healthy liquidity, and low cost structure. Spirit's cost advantage over its peers remains a significant ratings factor as it provides the company a meaningful cushion to operate through potential future economic downturns while maintaining adequate financial health. The ratings are also supported by an improving unit revenue environment among U.S. air carriers.
Fitch’s primary rating concerns include leverage and cash flow metrics that have weakened beyond the agency’s prior expectations driven by steep unit revenue declines over the past two years. The carrier continues to grow at a rapid pace, and heavy capital spending on new aircraft and higher debt balances may cause credit metrics to deteriorate modestly in the near-term. Continued increases in leverage due to heavier than expected borrowing, deteriorating margins from increased competition, or failure to manage future capacity growth could lead to negative rating actions. These concerns are offset by Fitch’s longer-term expectations for these metrics to trend in a positive direction. Other concerns include a difficult competitive environment among US carriers and ongoing labor negotiations with Spirit’s pilot union that will likely drive wages higher in the near-term.