Following a US judge’s decision to block JetBlue Airways’ acquisition of rival low-cost carrier Spirit Airlines, Spirit has told investors that it is moving to shore up its financial position.
The ultra-low-cost carrier (ULCC) expects revenue generated during the fourth quarter of last year to be ”at the high end of the company’s initial guidance” due primarily to lower-than-anticipated fuel prices and strong bookings during the end-of-year holiday travel season, it said in a 19 January filing with the US Securities and Exchange Commission.
As a result, the carrier has adjusted its guidance for its fourth-quarter operating margin, now anticipating it to be down 12-13% rather than the previous guidance of 15-19% lower.
The company disclosed that, as of 31 December, it held some $1.3 billion of cash and equivalents and $300 million of revolving credit.
Industry analysts described a relatively bleak future for Spirit after its deal with JetBlue was struck down on anti-competitive grounds, with TD Cowen aviation analyst and managing director Helane Becker warning that the carrier is at risk of bankruptcy and liquidation.
Spirit lost $158 million during the third quarter of 2023. But the ULCC says now it is working to steady itself.
“During the fourth quarter, the company took several steps to shore up its liquidity to allow it to make the necessary strategic shifts to enable the company to compete effectively in the current demand backdrop and return the business to profitability,” Spirit says.
In December, the company sold and leased back 20 of its narrowbody Airbus jets, and in January it completed transactions for five more aircraft, generating a total of $419 million in cash. It’s also ”assessing options” to refinance some debt that is scheduled to come due in 2025.
The Florida-based airline says it is expecting capacity in the first quarter of 2024, as measured in available seat miles, to rise one to two percent over the same period last year.
Spirit also says it is negotiating with Pratt & Whitney regarding compensation for the geared turbofan engine issues that have plagued operators of Airbus A320-family aircraft.
In October, Spirit said it anticipates an average of 26 jets will be grounded during 2024.
”Discussions with Pratt have progressed considerably since October,” Spirit says, ”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 is scheduled to host a conference call on 8 February to discuss its fourth-quarter results.
