Spirit Airlines expects total revenue for the fourth quarter of 2023 to be “at the high end” of guidance, noting that bookings over the peak festive travel period were strong. Lower fuel cost for the quarter resulting in lower-than-expected operating expenses for the airline, which led to a positively revised operating margin guidance up by 450 basis points from negative 15 to 19% to negative 12 to 13%.
Spirit Airlines also noted that it had taken several steps during the fourth quarter to shore up liquidity to “allow it time to make the necessary strategic shifts to enable the Company to compete effectively in the current demand backdrop and to return the business to profitability”.
As of December 31, 2023, Spirit had $1.3bn of liquidity, including unrestricted cash and cash equivalents, short-term investment securities and $300 million under its existing revolving credit facility. Spirit extended the maturity of the revolver out to September 30, 2024 in November last year.
Spirit also raised funds via sale-leaseback transactions for 20 aircraft, resulting in repayment of approximately $325 million of indebtedness on those aircraft and net cash proceeds of $320 million. The airline continued raising cash via this channel with the completion of a further five sale-leaseback transactions, resulting in repayment of approximately $140 million of indebtedness and net cash proceeds of $99 million.
Spirit confirms that it remains in negotiations with Pratt & Whitney regarding fair compensation for the financial damages related to the geared turbo fan (GTF) neo engine availability issues. The airline said that discussions with Pratt have “progressed considerably since October, and while no agreement has been reached to date, the Company believes the amount of compensation it will receive will be a significant source of liquidity over the next couple of years”.
Spirit has also confirmed that it is assessing options to refinance its 2025 debt maturities, including the $1.1 billion of aggregate principal amount of 8.00% senior secured notes.
For the first quarter 2024, Spirit estimates capacity growth will be up 1 to 2% year over year.
Although the United States District Court for the District of Massachusetts has granted the US Department of Justice’s request for a permanent injunction against the proposed merger of Spirit and JetBlue, Spirit reminded investors that the Merger Agreement between Spirit and JetBlue and Sundown Acquisition Corp., wholly owned subsidiary of JetBlue, dated July 28, 2022 “remains in full force and effect”. Spirit has stated that it disagrees with the court’s ruling and “continues to believe that a combination with JetBlue is the best opportunity to increase much needed competition and choice by bringing low fares and great service”.