Spirit Airlines (SAVE) Q4 2023 earnings

Spirit Airlines‘ CEO said Thursday the domestic market is improving and defended the budget airline’s ability to generate cash even without an acquisition by JetBlue Airways, which a federal judge blocked earlier this year.

Spirit expects to lose money in the first quarter, however, and said it projects revenue of between $1.25 billion and $1.28 billion, above analysts’ forecasts. It estimated it will be cash-flow positive in the second quarter of the year “and beyond.”

The budget airline is trying to find its footing after domestic fares fell last year, a Pratt & Whitney engine issue grounded dozens of its Airbus planes and the JetBlue deal failed in court. The two airlines are appealing that decision, though analysts have been pessimistic about the chances of reversing the ruling.

The failed merger has helped drive Spirit’s stock down more than 55% so far this year as investors fretted about its financial future. Spirit’s looming debt payments ahead have prompted some calls that the airline could have to restructure, or even liquidate.

“This misguided narrative has been advanced by an assortment of pundits,” Spirit CEO Ted Christie said on an earnings call Thursday. “Liquidity is always king, and we have enhanced our levels to give us the necessary flexibility to successfully close with JetBlue or to pursue our stand-alone plans.”

Spirit ended 2023 with liquidity of $1.3 billion.

On Thursday, Spirit reiterated that it is assessing options for 2025 and 2026 debt maturities.

The budget airline has spent months looking for ways to cut costs, including adjusting its network and shifting its aircraft delivery schedule.

“The Spirit team is 100% clear and focused on the adjustments we are currently deploying and will continue to make throughout 2024 to drive us back to cash flow generation and profitability,” Christie said in an earnings release.

Christie and other Spirit executives said they were encouraged by strong bookings at the end of last year and the upcoming spring break period.

Here’s what Spirit reported for the fourth quarter compared with what Wall Street expected, based on average estimates compiled by LSEG, formerly known as Refinitiv:

• Adjusted loss per share: $1.36 vs. an expected $1.46
• Total revenue: $1.32 billion vs. an expected $1.32 billion

Spirit’s net loss of $183.65 million, or $1.68 per share, is improvement from a net loss of $270.66 million, or $2.49 per share, during the year-ago quarter. Adjusting for one-time items the carrier reported a net loss of $1.36 per share.

Revenue was down 5% to $1.32 billion.

The carrier plans for 2024 capacity to be flat to up mid single digits compared with last year, and up 1.5% in the first quarter, Spirit said.

Weaker domestic airfares have had an outsized affect on budget airlines, which largely focus on U.S. routes. Added capacity has prompted them to discount flights, especially during off-peak periods. Spirit, Frontier Airlines, Southwest Airlines and Alaska Airlines have limited their capacity growth plans after fares dropped.

Spirit said fare revenue per passenger fell 25% in the fourth quarter to $48.24, while non-ticket revenue per passenger, which includes Spirit’s myriad fees like seat assignments and carry-on bags, dropped 6.6% to $66.60. Passenger flight segments were up 12% in the fourth quarter from the same period of 2022.

Spirit said it expects to have an average of 25 Airbus aircraft grounded this year because of the Pratt & Whitney engine issues.

Those disruptions are expected to peak at 40 aircraft grounded in December. Spirit said expects to have 215 airplanes in its fleet by the end of the year.

The Miramar, Florida-based airline again said that talks for compensation with Pratt & Whitney, a unit of RTX, have progressed and that “while no agreement has been reached to date, the Company believes the amount of compensation it will receive will be a significant source of liquidity over the next couple of years.”

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