Spirit Airlines could see $231 million in compensation in relation to the ongoing RTX subsidiary Pratt & Whitney GTF engine issues, estimates CFA airline analysis manager Neil Fraser during an IBA Insider podcast.
RTX has allocated $2.9bn for the issue and Fraser estimated that around $720,000 per aircraft for turbine disc replacement and labour cost; totalling $220 million for Fraser's estimated 300 A320 aircraft impacted by the issue. The remaining then would be used for compensation. For Spirit's 26 impacted aircraft and roughly $8.9 million in compensation per aircraft, Fraser was able to devise the estimated total compensation value. However, he advised to take the estimation ""with a heavy hand of salt"" with transportation and work scope not being considered in the calculation.
Fraser added: ""RTX are probably going to have to up their contribution."" He also said that RTX ""can certainly borrow if they need to"" referring to its third quarter results, ""so they should be able to support the issue if they need to... some may argue why not faster.""
While Pratt & Whitney said that 10X engine production turnaround time was around 100 days, Spirit had reportedly said that the grounding time had trebled. Fraser said: ""Obviously they are financial trouble and they may try and make the situation seem as if there’s more things working against them than they perhaps are but it seems that there’s a few other sources that corroborate this. The inspection time has gone up to 300 days.""
Fraser also added that while GoFirst ""exclusively blames"" the engine issues for its bankruptcy issues, he noted that Indigo, which was the second-most impacted by the engine issues, reported a 14.9% net profit margin in the fourth quarter. He said that while some airlines are extremely impacted, ""airlines are still coping"".
Spirit could see $231 million in GTF engine compensation, IBA Insider
