""Weak"" revenues drove ""disappointing"" results as Spirit posts near $200 million net loss

Spirit Airlines posted a net loss of $192 million for the second quarter of 2024 - adjusted to a loss of $157.9 million. In its earnings call, CEO and president Ted Christie said the ""disappointing result"" was largely driven by ""weak revenue results"". The airline reported total operating revenues of $1.3bn in the quarter and an operating loss of $152.5 million. Its operating margin was a negative 11.9%. Diluted loss per share was $1.76 - adjusted to a loss of $1.44 per share. ""The elevated level of industry capacity continues to make it very difficult to drive yield improvement for the most price sensitive leisure travel segment,"" said Christie. ""While frustrating these conditions validates that we are on the right path with our transformation strategy to redefine low fare travel with new high value travel options that allow guests to choose an elevated experience at an affordable price."" The call and its earnings report had emphasised heavily its new premium offering strategy. It is offering four travel options on top of its ancillary product offerings to its low cost model. ""We will still offer the quality low fare products many of our guests prefer but we will also provide guests the opportunity to choose a premium leisure experience with more space, flexibility and amenities at an affordable price,"" said Spirit chief commercial officer and executive vice president Matt Klein. ""And we can do all that because we still have and expect to continue to have amongst the lowest costs in the industry. We are not abandoning our low cost position, but rather we are leveraging it."" The new premium products will launch August 16, 2024. Klein added: ""The adoption and acceptance of these changes by the marketplace will take time and that means we need patience from our constituents and adequate liquidity to navigate the environment."" Spirit's newly hired CFO Fred Cromer - who previously served at Bombardier Commercial Aircraft and as CEO of Xwing - provided some extra comment: ""We estimate it will take more than a year before we realise the full financial benefits of our transformation plan and for industry capacity to come more into balance with demand."" Management said it believed media and social media attention to help drive traction for its new model. In addition, it said it has appointed a new advertising agency to help fan awareness of its new products. With the nature of Spirit's low-cost DNA, Christie said it was ""bringing in outside assistance"" to help it transition to its premium offerings. Management maintained that the low cost airline model is ""not broken or obsolete"" but rather ""quite the opposite"". Christie read in its results release: ""The continued intense competitive battle for the price-sensitive leisure traveller further reinforces our belief that we are on the right path with our transformation plan."" TD Cowen analysts said: ""Strategy pivot is ambitious, but we are sceptical about the size of the opportunity set for short haul premium leisure."" Total operating expenses were flat at $1.4bn and its passenger revenues were down to $1.25bn. Cromer said: ""This is clearly a disappointing result. And unfortunately, based on our revenue projection for the third quarter, it's going to get worse before it gets better."" During the quarter, it secured $37.2 million of credits issued by Pratt & Whitney in relation to its aircraft on ground (AOG) as a result of engine issues. It estimated an average of 20 AOG for the full year. It ended the quarter with 210 aircraft in its fleet. The airline said the AOG credits for the full year are estimated to benefit its 2024 liquidity by approximately $150-200 million. It ended the quarter with unrestricted cash and cash equivalents, short-term investment securities and liquidity available under the company's revolving credit facility of $1.1 billion. It extended the final maturity of its $300 million revolving credit facility to September 30, 2026. In its call, Christie said it had unencumbered assets worth over $500 million along with 50 owned airplanes that have an equity value estimated at $7bn. For its third quarter guidance, the airline guided an adjusted EBIT margin of a negative 24.5%-27.5%. This guidance included AOG credits. Spirit also recorded pre-delivery deposit refunds, net of pre-delivery payments of $162.2 million for the six months ending June 30, 2024, partially offset by $60.6 million spent on the purchase of property and equipment. The airline entered into an agreement with lessor AerCap for 36 A320neo family aircraft - expected to be delivered in 2027 and 2028.