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In its ongoing efforts to prevent bankruptcy, Spirit Airlines has taken significant measures to address its financial difficulties. The airline recently announced a series of drastic measures aimed at regaining profitability, including the sale of aircraft and reduction of personnel. These measures, disclosed in a regulatory filing on October 24, have had a significant impact on Spirit’s share price, which experienced a 15.3% increase on Friday, closing at $2.79.
One of the major steps taken by Spirit Airlines is the sale of 23 vintage Airbus aircraft to GA Telesis, a renowned aircraft-maintenance and component services platform. This transaction is expected to generate $519 million for the airline, with deliveries scheduled from this month to February 2025. In addition to the sale of aircraft, Spirit also announced cost-cutting measures that are projected to save the company approximately $80 million, primarily through job cutbacks.
These cost-cutting measures include reducing the number of commanders by approximately 100 and terminating approximately 240 pilots. The airline has also implemented a temporary freeze on recruitment for flight attendants and pilots, as well as offering current cabin crew members voluntary unpaid leave. These steps are part of Spirit Airlines’ efforts to streamline its operations and improve its financial outlook.
Despite these efforts, Spirit Airlines faced challenges earlier this month with reports of discussions with bondholders regarding a restructuring plan that may involve a Chapter 11 filing. However, the airline was able to secure a debt refinancing agreement that enabled it to postpone the prospect of bankruptcy temporarily. This agreement included postponing $1.1 billion in loyal bond debt with Visa and Mastercard until December 23, providing the airline with much-needed liquidity.
In addition to addressing its financial challenges, Spirit Airlines also faced obstacles in its pursuit of a potential merger with JetBlue. The proposed merger was ultimately denied by a federal magistrate in January following concerns raised by the U.S. Department of Justice about potential anti-competitive effects. This setback prompted Spirit Airlines to explore other options, including potential partnerships with other airlines like Frontier.
Frontier Airlines has emerged as a potential partner for Spirit Airlines, with speculation about a merger between the two carriers circulating in the market. While there are considerations about Frontier being a superior investment option due to its financial performance, Spirit is also taking steps to improve its operations and financial health. With capacity reductions and cost-cutting measures in place, Spirit Airlines is working towards a sustainable future despite the challenges it faces.
Looking ahead, Spirit Airlines anticipates further capacity reductions and operational changes in the coming years. The airline expects its capacity to decrease by the mid-teens on an annual basis for the entirety of 2025, driven by the sale and retirement of aircraft, as well as other factors like the grounded A320neo due to engine issues. Despite these challenges, Spirit aims to have over $1 billion in liquidity by the end of 2024, positioning the airline for future growth and stability.
In conclusion, Spirit Airlines is taking decisive measures to address its financial difficulties and ensure its long-term sustainability. By selling aircraft, reducing costs, and exploring strategic partnerships, the airline is navigating through challenging times with resilience and determination. With a focus on operational efficiency and financial health, Spirit Airlines is working towards a brighter future despite the obstacles it faces.
