Spirit Airlines has reported a net loss of $2.3 million, or a net loss of $0.02 per diluted share, for the second quarter of 2023. Excluding special items, adjusted net income for the second quarter 2023 was $32.3 million1, or an adjusted net income of $0.29 per diluted share. Spirit’s pre-tax income was $15.0 million with a pre-tax margin of 1.0 percent. Adjusted pre-tax income for the second quarter was $41.7 million and adjusted pre-tax margin was 2.9 percent.
"Unit revenue for the second quarter 2023 was strong and well above pre-Covid historical averages," said Ted Christie, Spirit's President and Chief Executive Officer. "However, demand for the peak summer travel period has been softer than expected, resulting in lower fare levels on the routes we serve. This summer we are comparing to a period of exceptionally strong domestic and near-field international demand in 2022, while at the same time seeing demand shift away from these regions towards long-haul international. Difficult weather and challenging Air Traffic Control initiatives are also creating a significant headwind to unit revenue."
He added: "These trends continued throughout July and we are assuming they will continue into the fall. However, once the international summer travel season ends and kids go back to school, we anticipate that demand will shift back towards domestic. This should mean a more normal pricing and demand environment for the peak holiday travel periods in the fourth quarter."
For the second quarter 2023, Spirit’s load factor was 82.9%. The airline highlighted that it had experienced numerous adverse weather events across its network during the second quarter leading to a DOT on-time performance of 64.4 percent and a DOT Completion Factor of 97.5 percent. Excluding these weather-related and other uncontrollable events, Spirit’s controllable completion factor for the second quarter 2023 was 99.7 percent.
Spirit’s total operating revenues for the second quarter 2023 were $1.4 billion, an increase of 4.8 percent compared to the second quarter 2022. Total revenue per ASM (TRASM) was 10.30 cents, a decrease of 10.7 percent compared to second quarter 2022 on 17.4 percent more capacity.
On a per passenger flight segment basis, compared to the same period in 2022, total revenue per passenger flight segment (segment) for the second quarter 2023 decreased 8.9 percent to $128.03. Compared to the second quarter 2022, fare revenue per segment decreased 20.1 percent to $57.86 and non-ticket revenue per segment increased 2.9 percent to $70.173.
Total GAAP operating expenses for the second quarter 2023 were about flat compared to the second quarter 2022, increasing 0.02 percent to $1,412.3 million. Adjusted operating expenses for the second quarter 2023 were also about flat compared to the second quarter 2022, increasing 0.2 percent to $1,385.5 million. Lower fuel expense year over year, primarily driven by lower average fuel prices, offset increases driven by increased flight volume, additional aircraft, inflationary wage pressures and other items.
Aircraft utilization in the second quarter 2023 was 11.3 hours, up 5.6 percent compared to the 10.7 hours in the same period of 2022.
"Despite achieving record quarterly revenue in the second quarter 2023, productivity headwinds, primarily related to pilot constraints and NEO engine availability issues, resulted in a disappointing operating margin. With these issues as well as an acute reduction in the domestic and Latin America demand outlook, we estimate our third quarter operating margin will range between negative 5.5 percent and negative 7.5 percent," said Scott Haralson, Spirit's Chief Financial Officer.
Spirit shared that the airline had reached an amendment with Airbus on its fleet order that reduces 2024 deliveries and spreads the remaining deliveries over 2025 to 2029, giving a more “consistent level of deliveries for the remainder of the decade”. Spirit has also upgauged all of its A319neo orders to A321neos. “We are very pleased with the changes and appreciate Airbus partnering with us to provide a stable and predictable order book through the end of the decade with an aircraft mix we view as beneficial to driving efficiencies throughout our business," said Haralson.
Spirit took delivery of five new A320neo aircraft and one A321neo aircraft during the second quarter 2023 and retired three A319ceo aircraft. The company ended the quarter with 198 aircraft in its fleet, an increase of 10.0 percent since the end of second quarter 2022.
Spirit ended second quarter 2023 with unrestricted cash and cash equivalents, short-term investment securities and liquidity available under its revolving credit facility of $1.5 billion.
Total capital expenditures for the six months ended June 30, 2023, were $146.1 million, primarily related to net outflows of aircraft pre-delivery deposits, expenditures related to the building of Spirit's new headquarters campus in Dania Beach, Florida and spare parts, including spare engines.
Interest expense in the second quarter 2023 included a favourable mark to market adjustment of $14.2 million related to the change in fair value of the derivative liability associated the company's convertible notes due 2026.