Spirit Airlines projected a loss in the second quarter due to ongoing challenges stemming from the grounding of several aircraft and industry-wide capacity issues. Despite strong travel demand, the ultra-low-cost carrier has struggled financially, prompting concerns about its ability to manage upcoming debt obligations.
The airline’s shares dipped by 11.4% in afternoon trading as it grapples with multiple setbacks. A significant portion of its fleet is expected to remain grounded this year due to issues with Pratt & Whitney Geared Turbofan (GTF) engines. This situation is anticipated to worsen in 2025, with even more aircraft affected.
The impact of these engine issues extends beyond operational disruptions, leaving Spirit overstaffed and inflating operating costs. While compensation agreements with Pratt & Whitney provide some relief, the financial toll remains substantial.
In response, Spirit has announced plans to furlough up to 260 pilots and implement additional cost-cutting measures, aiming to reduce expenses by $100 million this year. The airline has also deferred aircraft deliveries and negotiated with Airbus to postpone future orders, bolstering its cash reserves.
Exacerbating its financial woes is excess capacity in key markets, prompting aggressive pricing strategies to fill planes. Despite exiting certain cities to align capacity with demand, Spirit anticipates a decline in total revenue per seat mile and adjusted operating margin in the second quarter.
In the first quarter, Spirit reported an adjusted loss of $1.46 per share, slightly higher than analysts’ expectations. The airline remains focused on navigating these challenges and restoring profitability amidst a challenging operating environment.
