Spirit Airlines is in talks with bondholders about a pre-packaged bankruptcy that would allow the airline to reduce debt in exchange for equity. This move would potentially allow the carrier to reject leases on aircraft grounded due to engine problems. Twenty one Airbus narrowbodies are currently in storage (or heavy maintenance) out of 94 with Pratt & Whitney Geared Turbo Fan engines, according to Cirium fleet tracking data.
Out of $3.3 billion in debt, one third of that comes due in under a year, and it must refinance or extend the debt by October 21 under covenants with its credit card processor agreement.
Once among the most successful airlines in the industry, Spirit hasn’t turned a profit in five years. They’ve recently announced a move to sell bundled fares, a drastic shift away from its fee-based a la carte merchandising model.
And this past weekend they pulled more than 30 routes from their schedule. In total, Spirit Airlines capacity is contracting 20%.
The latest Diio update had the following adds (Green), and removals (Red) of domestic routes by major carriers this week. pic.twitter.com/Tl6QBukKRf
— AdrianWaltz (@AdrianWaltz) September 28, 2024
Spirit is one of many victims of misguided Department of Justice and DOT competition policy.
JetBlue is struggling, cutting costs, and shrinking – and finds itself under the thumb of Carl Icahn – because the federal government blocked its partnership with American Airlines – increasing the market power of United and Delta in New York and Delta in Boston.
The low-fare, fee-based segment is being dealt a blow by Spirit Airlines weakness after JetBlue’s acquisition of Spirit was blocked by DOJ.
And now flying between the Hawaiian islands could see less competition because DOT imposed conditions on the Alaska Airlines acquisition, requiring maintenance of that airline’s inter-island flying, and making it harder for Southwest Airlines to maintain its service.
According to aviation analytics company Cirium, Spirit has been operationally reliable cancelling just 0.71% of flights so far in 2024 which is second in the industry behind only Southwest and has operated approximately three quarters of its flights on-time. This represented a huge turnaround from the era that ended about 8 years ago when their ultra-low cost model meant giving short-shrift to operations.
The carrier represents about 5% of U.S. airline capacity and is the only airline serving Latrobe, Pennsylvania, and Atlantic City, New Jersey. Spirit’s average fare in June and July was $68 one-way, excluding taxes and fees, compared to an average of over $200 for American, Delta, United and Southwest.
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