Summary
- Despite continuous losses, Spirit Airlines is making progress toward its financial goals.
- Its chief executive admitted that the operating environment remains challenging.
- In Q2, Spirit Airlines expects to earn less than during the same quarter a year prior.
As Spirit Airlines reported its Q1 2024 results, the airline expects that it would make less revenue during Q2 2024 in comparison to a year prior as the low-cost carrier continues facing a challenging operating environment, including dozens of grounded Airbus A320neo family aircraft.
Progressing toward financial goals
Spirit Airlines reported operating revenues of $1.2 billion, or 6.2% lower than in 2023, while its operating costs ticked up slightly by 0.7% to $1.4 billion, resulting in an operating loss of $207.3 million. Meanwhile, its net loss was $142.6 million.
The low-cost carrier’s passenger flight segments numbered 10.8 million, 2% more Year-on-Year (YoY), while its available seat miles (ASM), measuring capacity, grew to 13.4 billion (2.1% growth YoY). However, its load factors decreased by 0.1%, while departures also decreased by 1.1%. Spirit Airlines’ average yields also contracted by 8%.
Photo: Vincenzo Pace I Simple Flying
According to Ted Christie, the President and chief executive officer (CEO) of Spirit Airlines, while the airline was loss-making during the quarter, the company was making progress toward its financial goals. Christie also admitted that the operating environment has remained challenging, especially due to elevated capacity in its core markets.
“Nevertheless, we are confident that the strategic changes we are implementing, together with our cost saving initiatives, will allow Spirit to compete effectively in today’s marketplace and drive continuous improvement in the years ahead.”
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Pratt & Whitney troubles
Meanwhile, Scott Haralson, the chief financial officer (CFO) of Spirit Airlines, pointed out that while it expected a successful merger with JetBlue, its executives had been working hard in the background to come up with a backup plan if it failed. And since it has failed, with the Department of Justice (DOJ) successfully winning a legal battle against JetBlue’s acquisition of Spirit Airlines, the first step of its independent future was to finalize an agreement with Pratt & Whitney.
Photo: Spirit Airlines
Spirit Airlines announced that it reached an agreement with the engine manufacturer over the aircraft on ground (AOG) situation that it has been facing since Pratt & Whitney informed customers about the need to accelerate the removals and conduct inspections of the PW1100G engine in July 2023. The two companies signed the deal on March 26, resulting in Pratt & Whitney, through its International Aero Engines (IAE) subsidiary, shoring up the airline’s liquidity by between $150 million and $200 million.
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Flat growth
Nevertheless, the airline’s latest financial report stated that it plans to have around 25 AOG during 2024. Pratt & Whitney already had paid the carrier $30.6 million in Q1, with Spirit Airlines planning to discuss compensation for AOG beyond 2024 at a later date.
Photo: Spirit Airlines
As a result, its ASMs should grow by around 2% in Q2 2024 YoY, while full-year capacity, measured in ASMs, should either be flat or go up by single digits. At the same time, the airline estimated that its revenues would be in the range of $1.32 billion to $1.34 billion. During the same quarter in 2023, it earned $1.43 billion.
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