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Spirit Airlines announced today that it has reached an agreement with Airbus to alter the delivery schedule for aircraft orders scheduled over the next decade. The low-cost carrier is also planning to furlough 260 pilots starting in September. Both actions come as a result of Pratt & Whitney engine issues and the airline’s current financial situation.
A filing with the United States Securities and Exchange Commission (SEC) today shows that Spirit Airlines and Airbus agreed on an amendment on April 3rd for the A320neo aircraft order (originally signed in December 2019). As a result of the amendment, Spirit Airlines will defer all aircraft deliveries from Q2 2025 to the end of 2026 and shift these to future dates between 2030 and 2031. With this change, the liquidity of the carrier should improve by around $340 million over the next two years.
As a result of grounded aircraft due to Pratt & Whitney GTF engines not being available, along with the 2025 and 2026 aircraft deferrals, Spirit also plans to furlough 260 Pilots starting on September 1st. Spirit entered into a compensation agreement with Pratt & Whitney recently around the GTF engines. It will receive monthly payments that are estimated to improve Spirit’s liquidity by $150 million to $200 million over the term of that agreement.
Ted Christie, Spirit’s President and Chief Executive Officer, said:
This amendment to our agreement with Airbus is an important part of Spirit’s comprehensive plan to bolster profitability and strengthen our balance sheet. Deferring these aircraft gives us the opportunity to reset the business and focus on the core airline while we adjust to changes in the competitive environment. In addition, enhancing our liquidity provides us additional financial stability as we position the Company for a return to profitability. We would like to thank our partners at Airbus for their continued support and commitment to the long-term success of Spirit.
I am extremely proud of our dedicated Spirit team for their focus and resilience over the last few years. Unfortunately, we had to make the difficult decision to furlough Pilots given the grounded aircraft in our fleet and our deferral of future deliveries. We are doing everything we can to protect Team Members, while balancing our responsibility to return to positive cash-flow and thrive as a healthy company with long-term growth prospects. I thank the Spirit team for continuing to deliver affordable fares and great experiences to Guests.”
Spirit has had an eventful year. The Department of Justice (DOJ) won its effort to block JetBlue’s acquisition of the airline. JetBlue was motivated to buy Spirit for its aircraft and pilots. With plane availability being pushed, it only makes sense that Spirit would need to ground some of its pilots.
Anthony’s Take: Spirit is doing what it can to march towards profitability. These are smart moves that will hopefully move the airline into positive territory over the next few years.
(Image Credits: Spirit Airlines.)
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1 comment
Add in the bottleneck in 737 production due to Boeing’s shortsightedness and I’m not surprised that Airbus is plenty agreeable to defer these planes that it can easily sell elsewhere.