Spirit CEO calls recent speculation on its future a “misguided narrative”

Spirit Airlines CEO Ted Christie has called the recent speculation over its future should the JetBlue merger not succeed a “misguided narrative” that has been pushed by various “pundits” in its fourth quarter 2023 earnings call. The $3.8 billion merger deal was blocked by the US Department of Justice in accordance with anti-competition laws. Both airlines have appealed the decision and expect a decision later in the year. Christie stated that the company would not comment further or answer questions regarding the merger during the rest of the earnings call, only that the merger would be a “compelling combination” for the airlines and American customers and that Spirit “strongly” disagrees with the court decision. In relation to the GTF engine availability issues, Spirit Airlines CFO Scott Haralson added: “In January [2024], we averaged 13 grounded neo aircraft and continue to estimate this number will climb steadily to an average of about 40 in December, averaging about 25 AOGs for the full year 2024.” He added that airline continues to face “cost pressures from carrying costs” due to the engine availability issues as well as inflation pressures on wages and increases in aircraft rent with a greater mix of leased versus debt-financed aircraft. Spirit also expects to take delivery of 27 aircraft for the year, which are fully financed either by the aircraft delivered from Airbus or from sale leaseback transactions. It also has deliveries from lessors as direct operating leases. “The company is aware of its 2025 and 2026 debt maturities and is assessing options to address those maturities when the time is appropriate,” said Haralson. Christie said that “margin repair” will play a vital role to the airline, adding that is “making changes to network construction, peak versus off-peak flying, and geographic and market concentration” and will assess the success and subsequently adjust the components. Christie added: “Liquidity is always king, and we have enhanced our levels to give us the necessary flexibility to successfully close with JetBlue or to pursue our standalone plans.” “We believe over $1.3bn of total liquidity at the end of 2023 should be more than adequate to sustain us until the business is back to generating cash,” said Haralson. “This is a milestone we think we will cross as we enter March”. He added that Spirit is confident it will “return a positive cash generation” and that it will continue assessing opportunities to “further shore up liquidity” throughout 2024. However, a TD Cowen report stated: “We continue to believe the company will report net losses for the foreseeable future” and that going from a negative operating margin to a positive one may “prove difficult”.