Spirit Airlines updates first quarter guidance, expects $1.26bn revenue

Spirit Airlines has provided update to its guidance for the first quarter of the year, with its total revenue now being estimated to be approximately $1.265bn. Its previous guidance for total revenue was between $1.25bn and $1.28bn. The airline also advised that it estimates its total capital expenditures for the first quarter of the year to be approximately around $30 million in relation to its new headquarters campus being built in Florida, as well as purchases of spare parts, including four spare engines, partially offset by net inflows of aircraft pre-delivery deposits. Spirit further estimates that it ends the first quarter with $1.2bn of unrestricted cash and cash equivalents and short-term investment securities, as well as $300 million of liquidity under its revolving credit facility. Spirit's agreement with Pratt & Whitney affiliate International Aero Engines (IAE) back in March, which will provide Spirit with a monthly credit through to the end of 2024 as compensation for each Spirit aircraft grounded due to the GTF engine availability issues, is expected to impact its liquidity for the full year by around $150 million and $200 million. The airline is looking to discuss appropriate arrangements for any of its aircraft that remain grounded beyond the end of the year. The US carrier initially estimated that it would recognise $38 million of credits for aircraft on ground (AOG), however after consideration of accounting guidance, the airline disclosed that the credits will be accounted for as vendor consideration and would be ""recognised as a reduction of the purchase price of the goods and services acquired from IAE during the period, which may include maintenance costs, purchase of spare engines and short-term rentals of spare engines"". Spirit added in its stock filing: ""This accountment treatment will result in delayed recognition of a significant portion of these credits in the company's consolidated statement of operations because they will initially be recognised as a reduction to the cost basis of capitalised maintenance and/or spare engines."" For the first quarter, Spirit now estimates it will recognise around $1.6 million of credits related to AOG. Spirit said: ""Despite the estimated amount of credit recognised during the quarter being significantly less-than-expected, total operating expenses for the quarter are estimated to be in line with the company’s previous guidance primarily due to better-than-expected operational efficiencies that drove less labour and other expense."" As of 16:12 BST on April 15, Spirit's stock was up nearly 10%.