Spirit Airlines (SAVE) Q4 2023 earnings

Spirit AirlinesThe CEO said Thursday that the domestic market was improving and defended the budget airline's ability to generate cash even without an acquisition by JetBlue Airwayswhich a federal judge blocked earlier this year.

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

The budget airline is trying to regain its footing after domestic fares fell last year, a Pratt & Whitney an engine problem grounded dozens of its Airbus planes and the JetBlue deal collapsed in court. Both airlines are appealing the decision, although analysts are pessimistic about the chances of reversing the decision.

The failed merger helped send Spirit's shares down more than 55% year to date as investors worried about its financial future. Spirit's looming debt payments have sparked calls that the airline may need to restructure or even liquidate.

“This erroneous narrative has been put forward by a number of experts,” Spirit CEO Ted Christie said Thursday during an earnings conference call. “Liquidity is still king, and we have improved our levels to give us the flexibility to successfully close with JetBlue or continue our standalone projects.”

Spirit ended 2023 with cash of $1.3 billion.

On Thursday, Spirit reiterated that it was evaluating options for the 2025 and 2026 debt maturities.

The budget airline has spent months looking for ways to cut costs, including adjusting its network and changing 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 get us back to cash flow generation and profitability,” Christie said in a results release.

Christie and other Spirit executives said they were encouraged by strong bookings late last year and the upcoming spring break.

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

  • Adjusted loss per share: $1.36 versus $1.46 expected
  • Total income: $1.32 billion versus $1.32 billion expected

Spirit's net loss of $183.65 million, or $1.68 per share, improved from a net loss of $270.66 million, or $2.49 per share, in the quarter from last year. Including one-time items, the carrier reported a net loss of $1.36 per share.

Revenue fell 5% to $1.32 billion.

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

Low domestic airfares have had an outsized impact on low-cost airlines, which focus largely on U.S. routes. The increase in capacity has prompted them to reduce flights, especially during off-peak periods. Spirit, Border Airlines, Southwest Airlines And Alaska Airlines have limited their capacity growth plans after the tariff cut.

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 such as seat assignments and carry-on bags, fell 6.6% to $66.60. Passenger flight segments increased by 12% in the fourth quarter compared to the same period of 2022.

Spirit said it expects an average of 25 Airbus planes to be grounded this year due to Pratt & Whitney engine problems..

These disruptions are expected to peak at 40 grounded planes in December. Spirit said it expects to have 215 planes in its fleet by the end of the year.

The Miramar, Fla.-based airline again said it was discussing compensation with Pratt & Whitney, a unit of RTXhave progressed and that “although no agreement has been reached to date, the Company believes that the amount of compensation it will receive will constitute an important source of liquidity over the next two years”.

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