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Spirit Airlines is reportedly in the early stages of renewing its merger talks with Frontier Airlines. It’s also looking to reduce its costs amidst its current financial challenges and uncertain future. In order to do so, it will need to layoff employees and sell some of its aircraft.
The low-cost carrier has identified $80 million worth of cost savings in roles that it plans to layoff in the near future. No word has been released on how many employees will be impacted or what their roles are within the airline. Additionally, 23 aircraft will be sold to aviation services firm, GA Telesis, for around $519 million. These Airbus A320ceo and A321ceo aircraft were built between 2014 and 2019 and will be delivered this month through February.
Spirit reports that the proceeds from the aircraft sale, along with the repayment of its related debt, will improve its liquidity by $225 million through the end of next year. The airline appears to be trying to get on the right track, but in a recent regulatory filing, Spirit estimates its Q4 capacity to drop 20% from last year. This is the result of ongoing issues around the availability of Pratt & Whitney GTF engines as well as the sale of the aircraft mentioned above.
Spirit’s financials have not been pretty for some time (it reported a net loss of $192 million in Q2). It recently extended its debt restructuring deadline with Visa and Mastercard (it’s now December 23rd versus earlier this week). The airline needs to refinance $1.1 billion in bonds or it will not be able to process credit card transactions in 2025.
There have been more than 40 routes cut in recent months as Spirit juggles its schedule to find the most profitable ones. This comes at a time when it has updated and rebranded its offerings, added a more First Class and European Business Class (middle seat blocked) experience and eliminated fees for changes and cancellations. Will it all be enough to keep Spirit from filing for bankruptcy?
If a filing were to happen, it would not be imminent. The Wall Street Journal first reported on this possibility or restructuring its balance sheet through an out-of-court transaction. In response to the article, a Spirit spokesperson pointed the reporter to a statement made by Spirit’s CEO, Ted Christie, made during the Q2 earning’s call. He’s quoted as saying:
Because those conversations are ongoing, we are not going to go into detail or take any questions on this topic or speculate on potential outcomes. [The company was focused on securing the] best outcome for the business as quickly as possible.”
The JetBlue and Spirit merger would have likely painted a different picture for the low-cost carrier. A judge ruled in March that the $3.8 billion merger was not moving forward based on anti-competition concerns. Had the deal been completed, the combined airline would have become the fifth largest in the United States. Chapter 11 would give the airline a path as it would help restructure debt while maintaining its operations and the chance for a potential merger.
Anthony’s Take: I’ve been a fan of Spirit for some time. I’m hoping that it finds its way and if that includes a merger with Frontier that elements like the Big Front Seat® do not go away.
(Image Credits: Spirit Airlines.)
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Advertiser & Editorial Disclosure: The Bulkhead Seat earns an affiliate commission for anyone approved through the links above This compensation may impact how and where links appear on this site. We work to provide the best publicly available offers to our readers. We frequently update them, but this site does not include all available offers. Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed, or approved by any of these entities.
