Spirit Airlines, a budget airline based in Miramar, Florida, has reported a narrowed loss of nearly $184 million in the fourth quarter. Despite this, CEO Ted Christie remains optimistic about the carrier’s path to profitability and believes that the domestic air travel market is improving.
The airline has faced several challenges recently, including a decline in domestic fares, grounding of some Airbus planes due to Pratt & Whitney engine issues, and the blocked acquisition by JetBlue Airways. These factors have contributed to a significant drop in Spirit’s stock price, causing concerns about its financial future. Some investors have even speculated that the airline may need to restructure or liquidate.
To address these challenges, Spirit Airlines has been actively seeking ways to cut costs. This includes adjusting its network and shifting its aircraft delivery schedule. Christie emphasizes that the Spirit team is fully committed to implementing these adjustments throughout 2024 to drive the company back to cash flow generation and profitability.
While the airline still expects to incur losses in the first quarter, it anticipates revenue between $1.25 billion and $1.28 billion, surpassing analysts’ forecasts. In the fourth quarter, Spirit reported an adjusted loss per share of $1.36, slightly better than the expected $1.46. Total revenue amounted to $1.32 billion, down 5% from the previous year.
Weaker domestic airfares have had a significant impact on budget airlines like Spirit, which primarily operate within the United States. Increased capacity in the market has led to discounted flights, particularly during off-peak periods. In the fourth quarter, Spirit experienced a 25% decrease in fare revenue per passenger, amounting to $48.24. Non-ticket revenue per passenger, which includes various fees such as seat assignments and carry-on bags, also declined by 6.6% to $66.60. However, passenger flight segments increased by 12% compared to the same period in 2022.
One of the major challenges faced by Spirit Airlines is the Pratt & Whitney engine issues, which have resulted in the grounding of Airbus aircraft. The airline expects to have an average of 25 aircraft grounded throughout the year, with a peak of 40 grounded planes in December. Despite these disruptions, Spirit plans to have 215 airplanes in its fleet by the end of the year. The company is in talks with Pratt & Whitney for compensation, and while no agreement has been reached yet, Spirit believes that the compensation received will be a significant source of liquidity in the coming years.
Looking ahead, Spirit Airlines aims to maintain flat to slightly increased capacity in 2024 compared to the previous year. In the first quarter, capacity is expected to rise by 1.5%. The airline remains focused on implementing adjustments and cost-cutting measures to regain profitability.
Overall, while Spirit Airlines has faced significant challenges in recent times, it remains optimistic about its future prospects. With a clear focus on cost reduction and adjustments, the airline aims to overcome its financial difficulties and return to profitability in the near future.
